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Given the following information, determine the markup per unit. Direct materials $76,000 Direct labor $130,000 Factory overhead $56,500 Selling and administrative expenses $43,000 Estimated units to be produced and sold 15,000 Total assets $200,000 Desired rate of return 10% Normal selling price per unit $21. 70 a.$21.70 b.$4.89 c.$4.20 d.$17.50

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abiolataiwo2015

Answer:

c.$4.20

Explanation:

Calculation to determine the markup per unit.

First step is to find the Total product costs.

Total product cost will be :

Direct materials $76,000 +Direct labor 130,000 +Factory overhead 56,500

= Total product costs $262,500

Second step is to find the Total cost per unit

Using this formula

Total cost per unit=Total product costs/Estimated units to be produced and sold

Let plug in the formula

Total cost per unit= ($262,500 ÷ 15,000 units) Total product costs=$17.50

The Third step is to find the Desired profit

Using this formula

Desired profit=Total assets ×Desired rate of return

Let plug in the formula

Desired profit= ($200,000 × 10%)

Desired profit=$20,000

The fourth step is to find the markup percentage

Using this formula

Markup percentage =[(Desired profit+Selling and administrative expenses)/Total product costs ]

Let plug in the formula

Markup percentage = [($20,000 + $43,000) ÷ $262,500]

Markup percentage=$63,000/$262,500

Markup percentage=24%

The last step is to find the Markup per unit

Using this formula

Markup per unit =Total product costs/Markup percentage

Let plug in the formula

Markup per unit=($17.50 × 24%)

Markup per unit= $4.20

Therefore the Markup per unit will be $4.20

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