Computing Markups The predicted 2009 costs for Osaka Motors are as follows: Manu

Question

Computing Markups The predicted 2009 costs for Osaka Motors are as follows:

Manufacturing Costs Selling and Administrative Costs

Variable manufacturing cost $100,000

Variable selling and admin cost $300,000

Fixed manufacturing cost 220,000

Fixed selling and admin cost 200,000

Average total assets for 2009 are predicted to be $6,000,000.

(a) If management desires a 13 percent rate of return on total assets, what are the markup percentages for total variable costs and for total manufacturing costs? (Round your answers to the nearest whole percent.) Markup on variable costs Answer % Markup on manufacturing costs Answer %

(b) If the company desires a 7 percent rate of return on total assets, what is the markup percentage on total manufacturing costs for (1) unassigned costs and (2) desired profit? (Round your answers to the nearest whole percent.) Markup to cover unassigned costs Answer % Markup to cover desired profit Answer %

Explanation / Answer

Average total assets 6,000,000 desire return (in %) 13% desire return (in amount)     780,000 Variable manufacturing Cost     100,000 Variable Selling & Admin Cost     300,000 Total Variable Cost     400,000 Fixed manufacturing Cost     220,000 Fixed Selling & Admin Cost     200,000 Total Manufacturing Cost     320,000 a Markup % percentage of variable Cost 195.0% Markup % percentage of Total Manufacturing 41% b Average total assets 6,000,000 desire return (in %) 7% desire return (in amount)     420,000 Unassigned Cost     420,000 Total Manufactuing cost     320,000 % of Total Manufacturing Cost 131.3% Desire Profit     420,000 Total Manufactuing cost     320,000 % of Total Manufacturing Cost 131.3%

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