LCM540: APPLICATION QUESTIONS -WEEK3 & 4 Q1. Express the markup on cost formula

Question

LCM540: APPLICATION QUESTIONS -WEEK3 & 4 Q1. Express the markup on cost formula in terms of the markup on price and use this relation to explain why a 100% markup on cost implies a 50% markup on price. The company has the following products and their total costs: Product Television Total Costs (Material+Labor Overheads) 1 900 +8001100 1300+600 + 900 900 + 1000+2000 800+700 +600 Laptop Mobile Washing Machine Calculate the following and comment: A. Total cost of each product and its price to maintain 50% markup on price. B. Percentage of each of the component of total cost to its total cost.

Explanation / Answer

Part :A Cost of Each Product and its Price Television Laptop Mobile Washing Machine Materials 1900 1300 900 800 labour 800 600 1000 700 Over head 1100 900 2000 600 Total Cost 3800 2800 3900 2100 Markup (100% of cost) 3800 2800 3900 2100 Price 7600 5600 7800 4200 Part B Persentage of each component to its total Total cost Television Laptop Mobile Washing Machine Amount in $ % on Total Cost Amount in $ % on Total Cost Amount in $ % on Total Cost Amount in $ % on Total Cost Materials 1900 50.00% 1900/3800 1300 46.43% 1300/2800 900 23.08% 900/3900 800 38.10% 800/2100 labour 800 21.05% 800/3800 600 21.43% 600/2800 1000 25.64% 1000/3900 700 33.33% 700/2100 Over head 1100 28.95% 1100/3800 900 32.14% 900/2800 2000 51.28% 2000/3900 600 28.57% 600/2100 Total Cost 3800 100.00% 2800 100.00% 3900 100.00% 2100 100.00%

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