Computing Markups The predicted 2014 costs for Osaka Motors are as follows: Manu

Question

Computing Markups The predicted 2014 costs for Osaka Motors are as follows: Manufacturing Costs Selling and Administrative Costs $300,000 200,000 Variable 100,000 Variable 220,000 Fixed Average total assets for 2014 are predicted to be $5,000,000. (a) If management desires a 12 percent rate of return on total assets, what are the markup percentages for total variable costs and for total manufacturing costs? (Round your answer to the nearest whole percent.) Markup on variable costs 0 % Markup on manufacturing costs 0 % (b) If the company desires a 10 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 answer to the nearest whole percent.) Markup to cover unassigned costs 0 % Markup to cover desired profit 0

Explanation / Answer

Manufacturing Costs: S&A Cost Variable Cost 100000 Variable Cost 300000 Fixed Cost 220000 Fixed Cost 200000 Total 320000 Total 500000 Average Total Assets 5000000 Desired Return(12%) 600000 A Manufacturing Costs: Mark Up Variable Cost 100000 6,00,000 Fixed Cost 220000 Manufacturing Costs: 320000 6,00,000 Markup on Variable Cost: Fixed Cost 420000 (220000+200000) Profit 6,00,000 Total 1020000 Variable Cost 400000 Markup on Variable Cost: 255% (1020000/400000) of VC Markup on Variable Cost: Total S&A Expense 500000 (220000+200000) Profit 6,00,000 Total 1100000 Manufacturing Costs: 320000 Markup on Manufacturing Cost 344% (1100000/320000) of Mcost B Desired Return(10%) 500000 On Unasiigned Cost Unassigned Cost 500000 Profit 500000 Total 1000000 Manufacturing Costs: 320000 Manufacturing Costs on Ussigned Cost 312.50% (1000000/320000) of Mcost On Desired Profit: Profit 500000 Manufacturing Costs: 320000 Manufacturing Costs on Desired Cost 156.25% (500000/320000)

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