Question

Determine the selling price for each mark-up percentage calculated in previous part. (Round all entries to 2 decimal places, e.g. 15.25.) Selling price 1. Absorption cost-based pricing $ 2. Variable cost-based pricing $ 3. Total cost-based pricing $ LINK ΤΟ ΤΕXT +A

Answer 1

Answer:

1.)

Absorption cost = Material Cost + Direct labor cost + Overhead cost
= (7200 * $45) + $240000+ (7200*$1.5+ $850) = $575650

Required return = $55000 * 15% = $8250

Required margin to cover other cost and desired return = $30000 + $4000+ (7200*$3.5) + $2400+ $8250 = $69850

Markup on absorption cost based pricing = $69850 / $575650= 12.13%

2.)

Variable cost = Material cost + Variable overhead + Variable marketing cost

= 7200* $45 + 7200*$1.5+ 7200*$3.5= $360000

Total fixed cost = $240000+ $30000+ $4000+ $2400+ $850 = $277250

Required markup to cover fixed cost and desired return = $277250 + $8250 = $285500

Markup percentage based on variable costing = $285500 / $360000 = 79.31%

3.)

Total cost = Variable cost + Fixed cost = $360000 + $277250 = $637250

Desired return = $8250

Markup percentage based on total cost = $8250/ $637250 = 1.29%