Question

Cost-Based Pricing and Markups with Variable Costs Compu Services provides computerized inventory consulting. The office and...

Cost-Based Pricing and Markups with Variable Costs

Compu Services provides computerized inventory consulting. The office and computer expenses are $400,000 annually and are not assigned to specific jobs. The consulting hours available for the year total 20,000, and the average consulting hour has $20 of variable costs.

(a) If the company desires a profit of $140,000, what should it charge per hour? $Answer

(b) What is the markup on variable costs if the desired profit is $160,000?

c) If the desired profit is $160,000, what is the markup on variable costs to cover (1) unassigned costs and (2) desired profit?

Markup to cover unassigned costs Answer %

Markup to cover desired profits Answer %

Business   Finance   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

Unassigned Cost = Fixed Cost = TCF = $ 400000, Variable Cost = $ 20 per hour and total consulting hours = 20000 annually

Therefore, Total Variable Cost = TVC = 20000 x 20 = $ 400000

Let the per hour consulting charge be $ P

Desired Profit = $ 140000

Therefore, P x 20000 - (TVC + TFC) = 140000

P x 20000 - 800000 = 140000

P = (940000/20000) = $ 47

Let the markup on the variable cost be $ K

Therefore, (K+20) x 20000 - (TVC + TCF) = 160000

20000K + 400000 - 800000 = 160000

K = 560000 / 20000 = $ 28

Let the markup to cover fixed cost be $ K1

Then , (K1+20) x 20000 - 400000 = 400000

K1 = (400000/20000) = $ 20

Markup % to cover unassigned cost = (20/ 20) x 100 = 100 %

Markup % to cover desired profit = (28/20) x 100 = 140 %

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Cost-Based Pricing and Markups with Variable Costs Compu Services provides computerized inventory consulting. The office and...
Cost-Based Pricing and Markups with Variable Costs Compu Services provides computerized inventory consulting. The office and computer expenses are $400,000 annually and are not assigned to specific jobs. The consulting hours available for the year total 20,000, and the average consulting hour has $20 of variable costs. If the desired profit is $160,000, what is the markup on variable costs to cover (1) unassigned costs and (2) desired profit? Markup to cover unassigned costs Answer % Markup to cover desired...
Variable Cost Method of Product Pricing Smart Stream Inc. uses the variable cost method of applying...
Variable Cost Method of Product Pricing Smart Stream Inc. uses the variable cost method of applying the cost-plus approach to product pricing. The costs of producing and selling 10,000 cell phones are as follows: Variable costs per unit: Fixed costs: Direct materials $150 Factory overhead $350,000 Direct labor 25 Selling and admin. exp. 140,000 Factory overhead 40 Selling and administrative expenses 25 Total variable cost per unit $240 Smart Stream desires a profit equal to a 30% return on invested...
Smart Stream Inc. uses the product cost method of applying the cost-plus approach to product pricing....
Smart Stream Inc. uses the product cost method of applying the cost-plus approach to product pricing. The costs of producing and selling 10,000 cell phones are as follows: Variable costs per unit: Fixed costs: Direct materials $150 Factory overhead $350,000 Direct labor 25 Selling and administrative expenses 140,000 Factory overhead 40 Selling and administrative expenses 25 Total variable cost per unit $240 Smart Stream desires a profit equal to a 30% return on invested assets of $1,200,000. a. Determine the...
Problem Data XYZ Co. uses the product cost concept of applying the cost-plus approach to product...
Problem Data XYZ Co. uses the product cost concept of applying the cost-plus approach to product pricing. The costs of producing and selling 10,000 units are as follows: XYZ desires profit equal to a 30% rate of return on invested assets of $1,200,000. Variable Costs per unit: Fixed costs: Direct materials $                 150 Factory Overhead $         350,000 Direct labor 25 Selling & admin. expense $         140,000 Factory overhead 40 Selling & Admin expense 25 Total $                 240 Calculations 1. Compute...
Variable Cost Concept of Product Pricing Voice Com, Inc., produces and sells cellular phones. The costs...
Variable Cost Concept of Product Pricing Voice Com, Inc., produces and sells cellular phones. The costs of producing and selling 5,000 units of cellular phones are as follows: Variable costs: Fixed costs:     Direct materials $ 95 per unit     Factory overhead $235,500     Direct labor 44     Selling and admin. exp. 82,750     Factory overhead 29     Selling and admin. exp. 22      Total $190 per unit Voice Com desires a profit equal to a 15% rate of return on invested assets of $665,000. Assume that...
Variable Cost Method of Product Pricing Smart Stream Inc. produces and sells cell phones. The costs...
Variable Cost Method of Product Pricing Smart Stream Inc. produces and sells cell phones. The costs of producing and selling 4,500 units of cell phones are as follows: Variable costs: Fixed costs:     Direct materials $ 70 per unit     Factory overhead $141,400     Direct labor 32     Selling and admin. exp. 49,700     Factory overhead 21     Selling and admin. exp. 17      Total variable cost per unit $140 per unit Smart Stream Inc. desires a profit equal to a 15% rate of return on invested...
Variable Cost Concept of Product Pricing Willis Products Inc. uses the product cost concept of applying...
Variable Cost Concept of Product Pricing Willis Products Inc. uses the product cost concept of applying the cost-plus approach to product pricing. The costs of producing and selling 7,000 units of medical tablets are as follows: Variable costs per unit: Fixed costs: Direct materials $109 Factory overhead $266,000 Direct labor 40 Selling and admin. exp. 91,000 Factory overhead 34 Selling and admin. exp. 27 Total $210 Willis Products desires a profit equal to a 25% rate of return on invested...
Hummingbird Company uses the product cost concept of applying the cost-plus approach to product pricing. The...
Hummingbird Company uses the product cost concept of applying the cost-plus approach to product pricing. The costs and expenses of producing 25,000 units of Product K are as follows: Variable costs:      Direct materials $2.50 Direct labor 4.25 Factory overhead 1.25 Selling and administrative expenses 0.50 Total 8.50 Fixed costs: Factory overhead $25,000 Selling and administrative expenses 17,000 Hummingbird desires a profit equal to a 5% rate of return on invested assets of $642,500. a. Determine the amount of desired...
Tranquility Care provides home healthcare services at an average price of $70 per hour and incurs...
Tranquility Care provides home healthcare services at an average price of $70 per hour and incurs variable costs of $45 per hour. Assume average fixed costs are $3,600 a month. (Round your answer to the nearest whole unit.) 1. What is the number of hours that must be billed to reach the breakeven point? ​ 2. If the company desires to make a profit of $2,000, how many hours must be completed? ​ 3. The company thinks it can reduce...
Markup on Cost, Job Pricing Ventana Window and Wall Treatments Company provides draperies, shades, and various...
Markup on Cost, Job Pricing Ventana Window and Wall Treatments Company provides draperies, shades, and various window treatments. Ventana works with the customer to design the appropriate window treatment, places the order, and installs the finished product. Direct materials and direct labor costs are easy to trace to the jobs. Ventana’s income statement for last year is as follows: Revenues    $226,700 Cost of goods sold:         Direct materials $114,000         Direct labor 38,000         Overhead 26,000    178,000 Gross...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT