Answer:
a. Calculate markup percentage, using the product cost concept. Rpund to one decimal place.
To calculate the markup percentage using the product cost concept. We will use the formula,
Markup Percentage = (Desired Profit + Total Selling and Administrative Expenses
) / Total Manufacturing Costs
Given in the Question is,
Desired Profit = 12% rate of return on assets of $960,000
Total Selling and Administrative Expenses = $105,000
Total Manufacturing Costs = $2,600,000
Substituting in the formula,
= ($960,000 x 12% + $105,000) / $2,600,000
= ($115,200 + $105,000) / $2,600,000
= $220,200 / $2,600,000
= 0.0846 = 8.46% is the markup percentage.
b. Compute the price of the automotive product. Round your answer to two decimal places.
Manufacturing Cost amount per unit $32.50
($2,600,000 / 80,000 units)
Markup ($32.50 x 8.46%) 2.75
Selling price $35.25
The price of the automotive product is $35.25.
