A company expects to produce and sell 9,000 units of a single product.Management desires an 18% return on assets of $1,750,000.The following additional company information is available: $\begin{array}{lr}
\text { Variable costs (per unit) } \
\text {Production costs } &\$ 79 \
\text { Nonproduction costs } &\$ 5 \
\text { Fixed costs (in total) } \
\text {Overhead } &\$ 279,000 \
\text { Nonproduction } &\$ 90,000
\end{array}$ Compute markup per unit.Assume that markup percentage equals desired profit divided by total costs.
A)$35
B)$84
C)$110
D)$125
E)$160

Question

A company expects to produce and sell 9,000 units of a single product.Management desires an 18% return on assets of $1,750,000.The following additional company information is available: $\begin{array}{lr}
 \text { Variable costs (per unit) } \
 \text {Production costs  } &\$ 79 \
 \text { Nonproduction costs } &\$ 5 \
 \text { Fixed costs (in total) } \
 \text {Overhead  } &\$ 279,000 \
 \text { Nonproduction } &\$ 90,000
\end{array}$ Compute markup per unit.Assume that markup percentage equals desired profit divided by total costs.
A)$35
B)$84
C)$110
D)$125
E)$160

Quizplus · Accepted Answer

Markup per unit = (Desired profit / Total costs) x Total costs= (18% x $1,750,000 / (9,000 x ($79 + $5 + $279,000 + $90,000))) x (9,000 x ($79 + $5 + $279,000 + $90,000))= $315,000 / $1,623,000 x $1,623,000= $315,000= $35

A Company Expects to Produce and Sell 9,000 Units of a Single