Question

Landau Gears provides the following cost information related to its production of its primary product: Per Unit Variable manufacturing cost $12 Fixed manufacturing cost 8 Variable selling and administrative expenses 2 Fixed selling and administrative expenses 3 Desired ROI per unit 7 What is the markup percentage assuming that Landau Gears uses absorption costing? a. 60% b. 35% c. 100% d. 28%

Answer 1

Answer:

The Mark Up % for Landau Gears (using absorption costing) = 28%

Explanation:

Landau Gears

Variable Manufacturing cost Per unit = $12

Fixed Manufacturing cost Per unit = $8

Variable Selling & Admin cost Per unit = $2

Variable Selling & Admin cost Per unit = $3

Desired ROI Per unit = $7

Calculate Mark-Up %

ROI = Sales minus Invested Fund (Cost of operations)

where ROI = $7/unit

$7 = Sales minus ($12 + $8 + $2 + $3)

$7 = Sales minus $25

Make Sales the subject of formula

Sales = $25 + $7 = $32

Mark Up = 7/25 x 100% = 28%