Problem:
The following information is available for a product manufactured by Gardenia Corporation:
Per Unit Total
Direct materials $ 62.50
Direct labor $ 47.50
Variable manufacturing OH $ 15.00
Fixed manufacturing OH $ 250,000
Variable selling and admin expenses $ 10.00
Fixed selling and admin expenses $ 55,000
Gardenia has a desired ROI of 16%. It has invested assets of $8,250,000 and expects to produce 2,000 units per year.
Instructions
Compute each of the following:
1. Cost per unit of fixed manufacturing overhead and fixed selling and administrative expenses.
2. Desired ROI per unit.
3. Markup percentage using the absorption cost approach.
4. Markup percentage using the contribution approach.