Question

In: Accounting

Lala Corporation manufactures frames. It costs $200 to manufacture each picture frame, $50 to market each...

  1. Lala Corporation manufactures frames. It costs $200 to manufacture each picture frame, $50 to market each picture frame, and $30 to ship each picture frame to customers. Research and developments costs are allocated at $40 per unit. Lala Corporation plans to use cost-plus pricing. Calculate the prospective selling price:
    1. if Lala Corporation marks up the manufacturing cost of the picture frames by 60% and
    2. if Lala Corporation marks up the full cost of the picture frames by 10%. Show your workings.

Solutions

Expert Solution

Answer 1)

Calculation of selling price based on mark up on manufacturing cost

Selling price = Total manufacturing cost + 60% of total manufacturing cost

                       = $ 200 + (200 X 60%)

                     = $ 200 + $ 120

                     = $ 320

Therefore selling price based on 60% mark up on manufacturing cost is $ 320.

Answer 2)

Calculation of selling price based on mark up on full cost

Particulars

Amount per unit (in $)

Manufacturing cost

                        200

Marketing cost

                           50

Shipping cost

                           30

Allocated research and development cost

                           40

Total cost

                        320

Add: mark up ($ 320 X 10%)

                           32

Selling price

                        352

Therefore selling price per unit based on 10% of full cost is $ 352.

ekkarill92 answered 2 years ago
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