Wilde Corporation budgeted the following costs for the production of its one and only product for the next fiscal year:
$\begin{array}{ll}
\text { Direct materials } & \$ 1,125,000 \
\text { Direct labor } & 775,000 \
\text { Manufacturing overhead } & \
\quad \text { Variable } & 850,000 \
\quad \text { Fixed } & 680,000 \
\text { Selling and administrative } & \
\quad \text { Variable } & 380,000 \
\quad \text { Fixed } & \underline{\$ 10,000} \
\text { Total costs } & \underline{\$ 4,320,000}
\end{array}$
Wilde has an annual target operating income of $920,000.
The markup percentage for setting prices as a percentage of total manufacturing costs is ________.
A)52.8%
B)78.5%
C)214.2%
D)41.7%

Question

Quizplus · Accepted Answer

The total manufacturing costs are the sum of direct materials, direct labor, and manufacturing overhead (variable and fixed), which equals $3,430,000. The target operating income is $920,000. The markup percentage is calculated as (Target Operating Income / Total Manufacturing Costs) * 100 = ($920,000 / $3,430,000) * 100 = 26.8%. However, the question asks for the markup as a percentage of total manufacturing costs, which is (Total Costs - Total Manufacturing Costs) / Total Manufacturing Costs * 100 = ($4,320,000 - $3,430,000) / $3,430,000 * 100 = 52.8%.

Wilde Corporation Budgeted the Following Costs for the Production of Its