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Computing Various Average Markup Percentages

Nancy Company has budgeted sales of $300,000 with the following budgeted costs:

Direct materials $60,000

Direct manufacturing labor 40,000

Factory overhead

Variable 30,000

Fixed 50,000

Selling and administrative expenses

Variable 20,000

Fixed 30,000

Question 1: Compute the average markup percentage for setting prices as a percentage of the full cost of the product

Question 2: Compute the average markup percentage for setting prices as a percentage of the variable cost of the product

Question 3: Compute the average markup percentage for setting prices as a percentage of the variable manufacturing costs

Solution Summary

Given a contribution margin income statement, this solution illustrates how to (a) compute the average markup percentage for setting prices as a percentage of the full cost of the product, (b) compute the average markup percentage for setting prices as a percentage of the variable cost of the product, and (c) compute the average markup percentage for setting prices as a percentage of the variable manufacturing costs.

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