Magpie Corporation uses the total cost method of product pricing. Below is cost information for the production and sale of 60,000 units of its sole product. Magpie desires a profit equal to a 25% return on invested assets of $700,000. Fixed factory overhead cost $38,700 Fixed selling and administrative costs 7,500 Variable direct materials cost per unit 4.60 Variable direct labor cost per unit 1.88 Variable factory overhead cost per unit 1.13 Variable selling and administrative cost per unit 4.50 The markup percentage on total cost for Magpie's product is

Question

Ray Fields

Business

4 February, 15:38

Magpie Corporation uses the total cost method of product pricing. Below is cost information for the production and sale of 60,000 units of its sole product. Magpie desires a profit equal to a 25% return on invested assets of $700,000. Fixed factory overhead cost $38,700 Fixed selling and administrative costs 7,500 Variable direct materials cost per unit 4.60 Variable direct labor cost per unit 1.88 Variable factory overhead cost per unit 1.13 Variable selling and administrative cost per unit 4.50 The markup percentage on total cost for Magpie's product is

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Jacqueline Edwards · Answer 1

Mark-up = 22.64%

Explanation:

Profit = Return on Investment (%) * assets/

Profit = 25% * 700,000 = 175,000

Total variable cost = (4.60 + 1.88 + 1.13 + 4.50) * 60,000 = 726600

Total cost = Total variable cost + total fixed cost

= 726600 + 38,700 + 7,500 = 772800

Mark-up = profit/cost * 100

= 175,000/726,600 * 100 = 22.64%

Mark-up = 22.64%