Question

Glover Inc. manufactures Product B, incurring variable costs of $15.00 per unit and fixed costs of $70,000. Glover desires a profit equal to a 12% rate of return on assets. Assets of $785,000 are devoted to producing Product B, and 100,000 units are expected to be produced and sold.

Answer 1

Answer:

Step-by-step explanation:

The questions are:

a. Compute the markup percentage using the total cost concept.

b. Compute the selling price of Product B.

a. The mark up percentage will be calculated as:

= Desired Profit / Total Cost

= ($785000 × 12%) / [($15 × 100,000) + $70,000]

= ($785,000 × 0.12) / [($15 × 100,000) + $70,000]

= $94,200 / $1,570,000

= 0.06

= 6%

b. Selling price of Product B will be calculated as:

= Cost amount per unit + Markup

= $15.70 + ($15.70 × 6%)

= $15.70 + $0.94

= $16.64