Question

Mallard Corporation uses the product cost concept of product pricing. Below is cost information for the production and sale of 45,000 units of its sole product. Mallard desires a profit equal to a 12% rate of return on invested assets of $800,000. Fixed factory overhead cost $82,000 Fixed selling and administrative costs 45,000 Variable direct materials cost per unit 5.50 Variable direct labor cost per unit 7.65 Variable factory overhead cost per unit 2.25 Variable selling and administrative cost per unit 0.90 The markup percentage on product cost for the company's product is....

Answer 1

Answer:
Particulars	Per unit
Material cost ($5.50 x 45,000)	$ 247,500
Add: Labor cost             ($ 7.65 x 45,000)	$ 344,250
Add: Variable Factory overhead Cost               ( $ 2.25 x 45,000)	$ 101,250
Add: Variable selling and administrative cost	$ 82,000
Total production Costs	$ 775,000
Particulars	Per unit
Variable Material cost	$ 5.50
Add: Variable Labor cost	$ 7.65
Add: Variable Factory overhead Cost	$ 2.25
Add: Variable selling and administrative cost per unit	$ 0.90
Product Cost Per Unit	$ 16.30
Total Cost of Production ( $16.30 x 45,000 units)	$ 733,500
Add: Fixed factory overhead cost	$ 82,000
Add: Fixed selling and administrative costs	$ 45,000
Total Costs	$ 860,500
Add: Desired Profit               ( $ 800,000 x 12% )	$ 96,000
Total Sales revenue	$ 956,500
The markup percentage on product cost    = Total Sales revenue (-) Total production Costs / Total production Costs     = ( $ 956,500 (-) $ 775,000) / $ 775,000     =   $ 181,500 / $ 775,000	23.42% (or) 23.4%