Question

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1) Mussatto Corporation produces snowboards. The following per unit cost information is available: direct materials $10, direct labor $12, variable manufacturing overhead $7, fixed manufacturing overhead $14, variable selling and administrative expenses $6, and fixed selling and administrative expenses $8. Using a 41% markup percentage on total per-unit cost, compute the target selling price. (Round answer to 2 decimal places, e.g. 10.50.) Target Selling Price $____________

2) The Heating Division of Kobe International produces a heating element that it sells to its customers for $44 per unit. Its variable cost per unit is $27, and its fixed cost per unit is $5. Top management of Kobe International would like the Heating Division to transfer 15,000 heating units to another division within the company at a price of $27. The Heating Division is operating at full capacity. What is the minimum transfer price that the Heating Division should accept? Minimum Transfer Price $__________

3) Morales Corporation produces microwave ovens. The following per unit cost information is available: direct materials $30, direct labor $28, variable manufacturing overhead $21, fixed manufacturing overhead $38, variable selling and administrative expenses $18, and fixed selling and administrative expenses $30. Its desired ROI per unit is $31. Compute the markup percentage using absorption-cost pricing. (Round answer to 2 decimal places, e.g. 10.50%.)   Markup Percentage _________%

4) Morales Corporation produces microwave ovens. The following per unit cost information is available: direct materials $39, direct labor $22, variable manufacturing overhead $17, fixed manufacturing overhead $40, variable selling and administrative expenses $15, and fixed selling and administrative expenses $29. Its desired ROI per unit is $30. Compute the markup percentage using variable-cost pricing. (Round answer to 2 decimal places, e.g. 10.50%.)   Markup Percentage _______%

Answer 1

Ans:1. Target Selling price=Total per unit cost+ Markup % on total cost

=> (Direct materials+ direct labor+Variable manufacturing +Fixed Manufacturing+Variable selling and administrative+Fixed selling and administrative)+ 41% of total cost

=> (10+12+7+14+6+8)+41% of total cost

=> ( 57+ 41% of 57)

=> 57+ 23.37

=> 80.37

2. Minimum transfer price = Variable cost incurred to produce the product + Opportunity cost of transferring the heating element.
Since the heating division is operating at full capacity , there is no opportunity cost of transferring the heating element.
Minimum transfer price = Variable cost per unit = $27 and number of units =15,000

Therefore Minimum transfer price= 15,000*$27

= $405,000

3. Markup %= ROI+ selling expenses/total cost*100

Total cost= { direct material+ direct labor+ Variable overhead+ fixed overhead)

Selling expenses =+{Fixed selling cost+ Variable selling cost}

Total cost= {30+28+21+38)

=117

Selling expenses= 18+30= 48

Markup %= 31+48/117*100

= 79/117*100

=67.52%

4. Markup % using variable cost pricing

Variable costs= direct material+ direct Labor+ Variable manufacturing overhead + Variable selling and administrative

= 39+22+17+15

= 93

Total fixed costs= Fixed Manufacturing costs+ fixed Selling and administrative costs

=40+29

=69

Markup%= ROI+total fixed costs/variable costs*100

=(30+69)/93*100

=99/93*100

=106.45%