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

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.

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Huyền Thanh 4 years 2021-08-21T05:26:23+00:00 1 Answers 19 views 0

Answers ( )

  1. quangkhai
    0
    2021-08-21T05:27:57+00:00
    Reply

    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

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