Nancy Company has budgeted sales of $750,000 with the following budgeted costs:

ID: 2381063 • Letter: N

Question

Direct materials $210,000

Direct manufacturing labor 110,000

Factory overhead

Variable 70,000

Fixed 100,000

Selling and administrative expenses

Variable 50,000

Fixed 60,000

Question 1: Compute the average markup percentage for setting prices as a percentage of the full cost of the product. (five points)

Question 2: Compute the average markup percentage for setting prices as a percentage of the variable cost. (five points)

Question 3: Compute the average markup percentage for setting prices as a percentage of the variable manufacturing cost. (five points)

Question 1: Compute the average markup percentage for setting prices as a percentage of the full cost of the product. (five points)

Total cost = 600000

Profit = 150000

Average markup percentage for setting prices = 150000/600000 = 25%

Question 2: Compute the average markup percentage for setting prices as a percentage of the variable cost. (five points)

Profit = $ 150000

Total variable cost = 440000

Average markup percentage for setting prices = 150000/440000 = 34.09%

Question 3: Compute the average markup percentage for setting prices as a percentage of the variable manufacturing cost. (five points)

Profit = $ 150000

Total variable manufacturing cost = 390000

Average markup percentage for setting prices = 150000/390000 = 38.46%

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