Question

# Part 4 USB Inc. predicted 2018 variable and fixed costs are as follows: Company budgeted for:...

 Part 4 USB Inc. predicted 2018 variable and fixed costs are as follows: Company budgeted for: 43,200 Units Variable costs Fixed costs Manufacturing 734,400 172,800 Selling and Administrative 216,000 60,500 Total 950,400 233,300 USB Inc. produces a wide variety of computer interface devices. Per unit manufacturing cost information about one of these products, a high-capacity flash drive is as follows: Direct material \$6 Direct labor 8 Variable Manufacturing Overhead 3 Fixed Manufacturing Overhead -allocated per unit 4 Total manufacturing costs \$21 The following is the variable selling and administrative costs for the flash drive: \$5 Management has set a 2018 target profit on the flash drive of: \$200,000

Required: Make sure you show your work or use cell references for all calculations. You will not earn credit if you just type in your answer.

1. Determine the markup percentage on total variable costs required to earn the desired profit-46%

 2. Use the variable cost markup you determined in #1 above to determine a suggested selling price for a flash drive. You are determining selling price per unit. Selling price is based on total variable cost plus markup from #1 above. Total variable cost per unit \$22.00 Markup above total Variable cost \$      10.03 Selling price per unit \$32.03 3. For the flash drive, break the markup determined in #2 above on variable costs into separate parts for fixed costs and profit. Markup for fixed costs Markup for profit Total Markup which should agree with what you calculated in #2 above for markup above variable cost

Solution 1:

Total Variable Cost = 43200 * Variable cost per unit = 43200 * (\$6 +\$8 +\$3 + \$5) = \$950,400

Desired profit = \$200,000

Total Markup desired including fixed costs = Desired profit + Fixed manufacturing cost + Fixed Selling and administrative cost = \$200,000 + \$172,800 + \$ 60500 = \$433,300

Markup percentage on Total variable Costs = \$433,300 / \$950,400 = 45.59%

Solution 2:

Total Variable cost per unit = \$6 +\$8+ \$3 + \$5 = \$22

Selling price per unit = Total Varible cost per unit + mark up on variable cost

= \$22 + (\$22*45.59%) =\$22 + \$10.03 = \$32.03.

Solution 3:

Marup for fixed cost = Total Fixed cost / Total units = \$233,300 / 43200= \$5.4

Marup for profit = Profit / total units = \$200,000 / 43200 = \$4.63

Total Markup = \$5.4 +\$4.63 = \$10.03

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