4. Oma Company has the following budgeted costs for 10,000 units: Variable Costs
ID: 2472079 • Letter: 4
Question
4. Oma Company has the following budgeted costs for 10,000 units:
Variable Costs
Fixed Costs
Manufacturing
$400,000
$150,000
Selling & Administrative
200,000
50,000
Total
$600,000
$200,000
Required:
a. What is the markup on variable costs needed to break even?
b. What is the markup on variable costs needed to obtain a target profit of $150,000?
c. What is the markup on manufacturing costs needed to obtain a target profit of $250,000?
Variable Costs
Fixed Costs
Manufacturing
$400,000
$150,000
Selling & Administrative
200,000
50,000
Total
$600,000
$200,000
Explanation / Answer
a. Markup on variable costs needed to break even =600,000+200,000/10,000 =80% b. Markup on variable costs needed to obtain a target profit of $150,000 =(400,000+200,000+150,000)/10,000 =75% c. Markup on manufacturing costs needed to obtain a target profit of $250,000 =400,000+150,000+250,000/10,000 =80%
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