Question

Brandon Company prices its products using a 50% markup on total manufacturing cost to cover selling and administrative expenses and to provide a reasonable return on investment. Cost per Unit Direct materials $39 Direct labor 20 Variable manufacturing overhead 27 Variable selling and administrative expenses 10 Fixed manufacturing overhead totals $200,000 per year. Fixed selling and administrative expenses are $100,000 per year. The average number of units sold per year is 10,000. Using these data and the functional cost approach to pricing products, estimate the NORMAL SELLING PRICE. Note: The markup will end up being 50% of the selling price.

Answer 1

Answer:

$212

Explanation:

Unit manufacturing cost:

Direct materials = $39

Direct labor = $20

Variable manufacturing overhead = $27

Fixed manufacturing overhead = $20

Total cost = $106

Now,

Markup = 50% of selling price ( or 100% of manufacturing cost ) = $106

Therefore,

Selling price = Total cost  + Markup

= $106 + $106

= $212