The following is cost and production data for the Wave Darter: Per unit Variable
ID: 2473692 • Letter: T
Question
The following is cost and production data for the Wave Darter:
Per unit
Variable manufacturing cost
$
420
Applied fixed manufacturing cost
230
*
Absorption manufacturing cost
650
Variable selling and administrative cost
45
Allocated fixed selling and administrative cost
50
*
Total cost
$
745
Variable manufacturing cost
$
420
Variable selling and administrative cost
45
Total variable cost
$
465
* Based on planned monthly production of 41 units (or 492 units per year).
The target profit is $44,000.
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)
The following is cost and production data for the Wave Darter:
Explanation / Answer
a.
Markup % using variable manufacturing cost=
(Desired profit+fixed cost+varible selling and administration cost)/variable manufacturing cost
=[44000+(280×492)+(45×492)]/(420×492)
=98.67%
b. Markup percentage using absirption costing=
(Desired cost+selling and distribution expenses)/ manufacturing cost
=(44000+(492×95))/(492×650)
=28.37%
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