31. Magpie Corporation uses the total cost concept of product pricing. Below is the cost information for the production...
31.
Magpie Corporation uses the total cost concept of product pricing. Below is the cost information for the production and sale of 56,300 units of its sole product. Magpie desires a profit equal to a 21% rate of return on invested assets of $643,000.
| Fixed factory overhead cost | $36,000 |
| Fixed selling and administrative costs | 7,900 |
| Variable direct materials cost per unit | 5.06 |
| Variable direct labor cost per unit | 1.88 |
| Variable factory overhead cost per unit | 1.13 |
| Variable selling and administrative cost per unit | 4.50 |
The MARKUP PERCENTAGE on total cost for the company's product is
a.30.5%
b.14.4%
c.18.0%
d.23.4%
Homework Answers
| Variable direct materials cost per unit | 5.06 | |
| Variable direct labor cost per unit | 1.88 | |
| Variable factory overhead cost per unit | 1.13 | |
| Fixed factory overhead cost per unit | 0.64 | =36000/56300 |
| Variable selling and administrative cost per unit | 4.50 | |
| Fixed selling and administrative cost per unit | 0.14 | =7900/56300 |
| Total cost per unit | 13.35 | |
| Desired Profit per unit | 2.40 | =(643000*21%)/56300 |
| Desired Profit per unit | 2.40 | |
| Divide by Total cost per unit | 13.35 | |
| Markup Percentage on Total cost | 18.0% | |
| Option C 18.0% is correct |
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