Question

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

                               

                                                                                                                                                                                                                                               

                                                                                                                               

                                                                                                                               

Answer 1

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