8-3 Computing Markups The predicted 2009 costs for Osaka Motors are as follows:

Question

8-3

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

Average total assets for 2009 are predicted to be $4,000,000.

(a) If management desires a 11 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 9 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 %

Manufacturing Costs Selling and Administrative Costs Variable $100,000 Variable $300,000 Fixed 230,000 Fixed 200,000

Explanation / Answer

Return on Total Assets 4000000*11% $440,000 Total Variable Costs Manufacturing Costs 100000 Selling & Admin Costs 300000 Total 400000 Total Manufacturing Cost Variable 100000 Fixed 230000 Total 330000 Markup on Variable Costs Return/ Variable costs 440000*100/400000 110% Mark up on Manufacturing Costs 440000/330000 133.33%

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