Raphael Corporation uses the product cost concept of product pricing. Below is cost information for the production and sale of 50,000 units of its sole product. Raphael desires a profit equal to a 12% rate of return on invested assets of $1,000,000. $\begin{array}{ll}
\$ 80,000.00 & \text { Fixed factory overhead cost } \
50,000.00 & \text { Fixed selling and administrative costs } \
5.00 & \text { Variable direct materials cost per urit } \
8.50 & \text { Variable direct labor cost per unit } \
2.50 & \text { Variable factory overhead cost per urit } \
1.00 & \text { Variable selling and admiristrative cost per urit }
\end{array}$ Refer to the information provided for Raphael Corporation. The markup percentage for the company's product is:
A) 25%.
B) 12.2%.
C) 29%.
D) 20%.

Question

Quizplus · Accepted Answer

The markup percentage is calculated as follows:Markup percentage = (Desired profit / Cost of goods sold) x 100%Desired profit = 12% x $1,000,000 = $120,000Cost of goods sold = (50,000 units x $5.00) + (50,000 units x $8.50) + (50,000 units x $2.50) = $750,000Markup percentage = ($120,000 / $750,000) x 100% = 25%

Raphael Corporation Uses the Product Cost Concept of Product Pricing