Question

AST Electrical provides the following cost information related to its production of electronic circuit boards. Per Unit Variable manufacturing cost $40 Fixed manufacturing cost $30 Variable selling and administrative expenses $ 8 Fixed selling and administrative expenses $12 Desired ROI per unit $15 What is its markup percentage assuming that AST Electrical uses absorption- cost pricing? 16.67%. 54.28%. 50%. 118.75%.

Answer 1

Answer:

50%

Explanation:

The computation of markup percentage is shown below:-

Unit Product Cost as per absorption Costing = Variable Manufacturing cost + Fixed manufacturing cost

= $40 + $30

= $70

Mark up needed to achieve Desired ROI per unit = Variable selling and administrative expenses +  Fixed selling and administrative expenses + Desired ROI per unit

= $8 + $12 + $15

= $35

Mark up percentage = Mark up needed ÷ Unit Product Cost as per absorption Costing

= $35 ÷ $70

= 50%

So, for computing the markup percentage we simply applied the above formula.