Oasis Inc. has average invested capital of $800,000 and a target return on investment of 15%. The total cost per unit is $20 based on a volume level of 25,000 units. Oasis' markup percentage on total cost is:
A)9.375%.
B)15.00%
C)24.00%.
D)47.50%.
E)62.50%.

Question

Quizplus · Accepted Answer

First, we need to calculate Oasis' target return on investment, which is $120,000 ($800,000 x 15%). 
Next, we need to calculate the total cost to produce 25,000 units, which is $500,000 ($20 x 25,000). 
Then, we can calculate the total revenue Oasis needs to generate to meet its target return on investment: 
Total revenue = Target return + Total cost 
Total revenue = $120,000 + $500,000 
Total revenue = $620,000

Finally, we can calculate Oasis' markup percentage on total cost: 
Markup percentage = (Total revenue - Total cost) / Total cost x 100% 
Markup percentage = ($620,000 - $500,000) / $500,000 x 100% 
Markup percentage = 24%

Therefore, the answer is C, 24.00%.

Oasis Inc Has Average Invested Capital of $800,000 and a Target