Question

Computing Markups The predicted 2009 costs for Osaka Motors are as follows Manufacturing Costs Selling and Administrative Costs Variable $100,000 Variable $300,000 Fed 230,000 Fixed 200,000 Average total assets for 2009 are predicted to be $8,000,000 (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 327.5 x % Markup on manufacturing costs 266.6 (b) If the company desires a 8 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 x % 193.9 Markup to cover desired profit 193.9 Check Incorrect

Answer 1

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Osaka Motors
Answer a		Note
Average Total assets	8,000,000.00	A
Desired return	11%	B
Desired return	880,000.00	C=A*B
Total Fixed costs
Manufacturing	230,000.00	D
Selling & Admin	200,000.00	E
Total Fixed costs	430,000.00	F=D+E
Total Mark up
Desired return	880,000.00	See C
Total Fixed costs	430,000.00	See F
Total Mark up	1,310,000.00	G=C+F
Total Variable costs
Manufacturing	100,000.00	H
Selling & Admin	300,000.00	I
Total Variable costs	400,000.00	J=H+I
Total Mark up	1,310,000.00	See G
Markup on Total Variable costs	328.00%	K=G/J
Total Selling & Admin
Variable Selling & Admin	300,000.00	L
Fixed Selling & Admin	200,000.00	M
Total Selling & Admin	500,000.00	N=L+M
Total Mark up
Desired return	880,000.00	See C
Total Selling & Admin	500,000.00	See N
Total Mark up	1,380,000.00	O=C+N
Total Manufacturing costs
Variable Manufacturing	100,000.00	P
Fixed Manufacturing	230,000.00	Q
Total Manufacturing costs	330,000.00	R=P+Q
Total Mark up	1,380,000.00	See O
Markup on Total Manufacturing costs	418.00%	S=O/R
Answer b
Average Total assets	8,000,000.00	See A
Desired return	8%	T
Desired return	640,000.00	U=T*A
Total Manufacturing costs	330,000.00	See R
Markup to cover desired profit	194.00%	V=U/R
Total Selling & Admin	500,000.00	See N
Total Manufacturing costs	330,000.00	See R
Markup to cover unassigned costs	152.00%	W=N/R
Total markup	346.00%	X=V+W