(TCO 7) Each month, Haddon Company has $275,000 total manufacturing costs (20% f

Question

(TCO 7) Each month, Haddon Company has $275,000 total manufacturing costs (20% fixed) and $125,000 distribution and marketing costs (36% fixed). Haddon's monthly sales are $500,000. The markup percentage on variable costs to arrive at the existing (target) selling price is

66 2/3%.

(TCO 8) Division A sells soybean paste internally to Division B, which, in turn, produces soybean burgers that sell for $5 per pound. Division A incurs costs of $0.75 per pound and Division B incurs an additional cost of $2.50 per pound. Which of the following formulas correctly reflects the company's operating income per pound?

Explanation / Answer

Total variable costs=((1-20%)*275000)+((1-36%)*125000)=300000
Sales=500000
Markup %=(sales-variable costs)/variable costs
=(500000-300000)/300000=66 2/3%
It is option D

2)It is option B
Net operating income=sales-total costs

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