Tech Com's. predicted 2017 variable and fixed costs are as follows: Variable costs Fixed costs Manufacturing...

Tech Com's. predicted 2017 variable and fixed costs are as follows: Variable costs Fixed costs Manufacturing 480,000 315900 Selling and Administrative 216,000 60500 Total 696,000 376,400 Tech com. produces a wide variety of computer interface devices. Per unit manufacturing cost information about one of these products, a high-capacity flash drive is as follows: Direct material $10 Direct labor 9 Variable Manufacturing Overhead 7 Fixed Manufacturing Overhead 9 Total manufacturing costs $35 The following is the variable selling and administrative costs for the flash drive: $6 Management has set a 2017 target profit on the flash drive of: $250,000 Required:

determine the mark up percentage on manufacturing casts required to earn the desired profit?

use the manufacturing cost mark up to determine a suggested selling price for the flash drive?

evaluate the variable and the manufacturing cost approaches to determine the mark up percentage.

Expert Solution

	Fixed Cost	Variable cost
Manufacturing	$ 480,000	$ 315,900
Selling & administrative	$ 216,000	$ 60,500
Total	$ 696,000	$ 376,400

A high capacity flash drive
Direct material	$ 10
Direct Labour	$ 9
Variable Manf o/H	$ 7
Fixed Manf o/H	$ 9
Total	$ 35
Variable selling & administrative	$ 6
Target Profit for Flash drive	$ 250,000

Part 1	Markup percentage should be

Total Manufacturing costs (Fixed + Variable)	$ 795,900
Desired Profit	$ 250,000
Percentage to be markup	31.4%

Part 2	Manufacturing cost markup
Direct material	$ 10
Direct Labour	$ 9
Variable Manf o/H	$ 7
Fixed Manf o/H	$ 9
Total	$ 35
Percentage to be markup	31.4%

Selling price	$ 46.0


Part 3	Variable cost approach mark up

Manufacturing	$ 315,900
Selling & administrative	$ 60,500
Total variable cost	$ 376,400
Desired Profit	$ 250,000
Percentage to be markup	66.4%

ekkarill92 answered 2 years ago

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