Question

Schopp Corporation makes a mechanical stuffed alligator that sings the Martian national anthem. The following information is available for Schopp Corporation’s anticipated annual volume of 500,000 units. Per Unit Total Direct materials $ 7 Direct labor $11 Variable manufacturing overhead $15 Fixed manufacturing overhead $3,000,000 Variable selling and administrative expenses $14 Fixed selling and administrative expenses $1,500,000 The company has a desired ROI of 25%. It has invested assets of $28,000,000.

Your answer is correct. Compute the total cost per unit. Total cost $ per unit SHOW SOLUTION SHOW ANSWER LINK TO TEXT

Your answer is correct. Compute the desired ROI per unit. ROI $ per unit SHOW SOLUTION SHOW ANSWER LINK TO TEXT

Your answer is incorrect. Try again. Using absorption-cost pricing, compute the markup percentage. (Round answer to 2 decimal places, e.g. 10.50%.) Absorption-cost pricing markup percentage % LINK TO TEXT

Your answer is correct. Using variable-cost pricing, compute the markup percentage. (Round answer to 2 decimal places, e.g. 10.50%.) Variable-cost pricing markup percentage %

Answer 1

Answer-a)- Total cost per unit = $56 per unit.

Explanation- Total cost per unit = Direct materials per unit+ Direct labor per unit+ Variable manufacturing overhead per unit+ Fixed manufacturing overhead per unit+ Variable S&A expenses per unit+ Fixed S&A expenses per unit

= $7+$11+$15+($3000000/500000 units)+$14 per unit+($1500000/500000 units)

= $56 per unit

b)- Desired ROI per unit=$14 per unit.

Explanation- Desired ROI per unit = Desired return on investment/Annual volume in units

= ($28000000*25%)/500000 units

= $7000000/500000 units

= $14 per unit

c)-Absorption-cost pricing mark-up percentage = 79.49%.

Explanation- Absorption-cost pricing percentage = {(Desired ROI per unit+ Variable selling & administrative expenses per unit+ Fixed selling & administrative expenses per unit)/ (Direct materials per unit+ Direct labor per unit+ Variable manufacturing overhead per unit+ Fixed manufacturing overhead per unit)}*100

= {($14 per unit+$14 per unit+$3 per unit)/($7 per unit+$11 per unit+15 per unit+$6 per unit)}*100

= ($31 per unit/$39 per unit)*100

= 79.49%

Fixed selling & administrative expenses per unit = $1500000/500000 units

= $3 per unit

Fixed manufacturing overhead per unit = $3000000/500000 units

= $6 per unit

d)-Variable-cost pricing mark-up percentage = 84.85%.

Explanation- Absorption-cost pricing percentage = {(Desired ROI per unit+ Variable selling & administrative expenses per unit)/ (Direct materials per unit+ Direct labor per unit+ Variable manufacturing overhead per unit+ )}*100

= {($14 per unit+$14 per unit)/($7 per unit+$11 per unit+15 per unit)}*100

= ($28 per unit/$33 per unit)*100

= 84.85%