Question

# Morales Corporation produces microwave ovens. The following per unit cost information is available: direct materials \$40,...

Morales Corporation produces microwave ovens. The following per unit cost information is available: direct materials \$40, direct labor \$21, variable manufacturing overhead \$14, fixed manufacturing overhead \$45, variable selling and administrative expenses \$14, and fixed selling and administrative expenses \$26. Its desired ROI per unit is \$28.80. Compute its markup percentage using a total-cost approach. (Round answer to 2 decimal places, e.g. 10.50%.)

 Markup percentage %

Total cost approach

Cost related to production

 Direct Material \$40 Direct Labor \$21 Variable manufacturing overhead \$14 Fixed manufacturing overhead \$45 Total \$120

Cost related to selling

 Variable selling and administrative expenses \$14 Fixed selling and administrative expenses \$26 Total \$40

Total cost=cost related to production+ cost related to selling

= \$120+\$40= \$160

ROI per unit= \$28.80

Mark up %= ROI or profit/ Cost*100

= \$28.80/160*100= 18%

The answer would be 18% mark up.