Wilde Corporation budgeted the following costs for the production of its one and only product for the next fiscal year:
$\begin{array}{ll}
\text { Direct materials } & \$ 1,150,000 \
\text { Direct labor } & 775,000 \
\text { Manufacturing overhead } & \
\quad \text { Variable } & 850,000 \
\quad \text { Fixed } & 670,000 \
\text { Selling and administrative } & \
\quad \text { Variable } & 410,000 \
\quad \text { Fixed } & \underline{490,000} \
\text { Total costs } & \underline{\$ 4,345,000} \
\end{array}$
Wilde has an annual target operating income of $920,000.
The markup percentage for setting prices as a percentage of variable manufacturing costs is ________.
A)52.83%
B)89.73%
C)65.31%
D)21.17%

Question

Quizplus · Accepted Answer

The markup percentage is calculated as (Target Operating Income + Fixed Costs) / Variable Manufacturing Costs. Here, the variable manufacturing costs are $1,150,000 (Direct Materials) + $775,000 (Direct Labor) + $850,000 (Variable Manufacturing Overhead) = $2,775,000. Fixed costs are $670,000 (Fixed Manufacturing Overhead) + $490,000 (Fixed Selling and Administrative) = $1,160,000. The markup percentage is ($920,000 + $1,160,000) / $2,775,000 = 89.73%.

Wilde Corporation Budgeted the Following Costs for the Production of Its