Question

Morales Corporation produces microwave ovens. The following per unit cost information is available: direct materials $36, direct labor $26, variable manufacturing overhead $19, fixed manufacturing overhead $44, variable selling and administrative expenses $15, and fixed selling and administrative expenses $20. Its desired ROI per unit is $30.40. Compute its markup percentage using a total-cost approach. (Round answer to 2 decimal places, e.g. 10.50%.)

Answer 1

Answer:

19%

Explanation:

Given that,

Direct materials = $36,

Direct labor = $26,

Variable manufacturing overhead = $19,

Fixed manufacturing overhead = $44,

Variable selling and administrative expenses = $15

Fixed selling and administrative expenses = $20

Desired ROI per unit = $30.40

Total manufacturing cost:

= Direct material + Direct labor + Variable manufacturing overhead + Fixed manufacturing overhead

= $36 + $26 + $19 + $44

= $125

Total selling cost:

= Variable selling cost + Fixed selling cost

= $15 + $20

= $35

Total cost per unit = Total manufacturing cost + Total selling cost

                              = $125 + $35

                              = $160

Therefore, the markup percentage is as follows:

$=\frac{Profit}{Total\ cost}\times 100$

$=\frac{30.40}{160}\times 100$

= 19%