Johanson Company had the following information: What is the markup based on prime costs?
A) 300.0%
B) 166.7%
C) 50.0%
D) 133.3%

Question

Johanson Company had the following information:  What is the markup based on prime costs?
A) 300.0% 
B) 166.7% 
C) 50.0% 
D) 133.3%

Quizplus · Accepted Answer

Markup based on prime costs is calculated as (gross profit/prime costs) x 100%. Using the information given, we can calculate:
Prime costs = Direct materials + Direct labor = $60,000 + $40,000 = $100,000
Selling price = Prime costs x Markup = $100,000 x 2.667 = $266,700
Gross profit = Selling price - Prime costs = $266,700 - $100,000 = $166,700
Markup based on prime costs = (gross profit/prime costs) x 100% = ($166,700/$100,000) x 100% = 166.7%. Therefore, the answer is B.

Johanson Company Had the Following Information: What Is the Markup