[The following information applies to the questions displayed below.] Variable m
ID: 2450658 • Letter: #
Question
[The following information applies to the questions displayed below.]
Variable manufacturing cost
$
380
Applied fixed manufacturing cost
210
Absorption manufacturing cost
590
Variable selling and administrative cost
50
Allocated fixed selling and administrative cost
150
Total cost
$
790
Variable manufacturing cost
$
380
Variable selling and administrative cost
50
Total variable cost
$
430
Use the general formula for determining a markup percentage to compute the required markup percentage using Variable manufacturing cost. (Round your percentage values to 2 decimal places (i.e. .1234 should be entered as 12.34).)
Use the general formula for determining a markup percentage to compute the required markup percentage using Absorption manufacturing cost. (Round your percentage values to 2 decimal places (i.e. .1234 should be entered as 12.34).)
Explanation / Answer
1. Computation of required markup percentage using variable manufacturing cost:
Variable Manufacturing Cost = $ 380
Yearly Production = 516 units
Total Variable Manufacturing Cost for the year = $380*516 = $196,080
Target Profit = $53,000
Markup percentage on Variable Manufaction Cost = [Target Profit/Total Variable Manufacturing Cost] *100
= [$53,000/$196,080]*100
= 27.03%
2. Computation of required markup percentage using Absorption manufacturing cost:
Absorption Manufacturing Cost = $ 590
Yearly Production = 516 units
Total Absorption Manufacturing Cost for the year = $590*516 = $304,440
Target Profit = $53,000
Markup percentage on Absorption Manufaction Cost = [Target Profit/Total Absorption Manufacturing Cost] *100
= [$53,000/$304,440]*100
= 17.41%
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