Jell Corporation uses the total cost concept of product pricing. Below is cost i

Question

Jell Corporation uses the total cost concept of product pricing. Below is cost information for the production and sale of 58,600 units of its sole product. Jell desires a profit equal to a 22% rate of return on invested assets of $581,000.00.

What is the markup percentage for the company's product?

Select the correct answer.

Fixed factory overhead cost $38,310.00 Fixed selling and administrative costs $7,435.00 Variable direct materials cost per unit $4.45 Variable direct labor cost per unit $1.88 Variable factory overhead cost per unit $1.13 Variable selling and administrative cost per unit $4.50

Explanation / Answer

Total variable cost per unit = 4.45+1.88+1.13+4.50

                                                      = 11.96 per unit

Total variable cost = No. of units sold x variable cost per unit

                                     = 58600 +11.96

                                     = 700,856

Total cost = total variable cost + (Total fixed cost)

                     = 700,856 + (38310+7435)

                     = 746,601

Desired profit = Invested assets x return on investment

                                = 581,000 x 22%

                                = 127,820

Markup % = desired profit/ Total cost

                    =127,820/746,601

                    = 17.12%

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