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Fixed overhead, ROI, markup percentages

34. The following information is available for a product manufactured by Gardenia Corporation:
Per Unit Total
Direct materials $ 62.50
Direct labor $ 47.50
Variable manufacturing OH $ 15.00
Fixed manufacturing OH $ 250,000
Variable selling and admin expenses $ 10.00
Fixed selling and admin expenses $ 55,000

Gardenia has a desired ROI of 16%. It has invested assets of $8,250,000 and expects to produce 2,000 units per year.

Instructions
Compute each of the following:
1. Cost per unit of fixed manufacturing overhead and fixed selling and administrative expenses.
2. Desired ROI per unit.
3. Markup percentage using the absorption cost approach.
4. Markup percentage using the contribution approach.

Solution Preview

Cost per unit of fixed manufacturing overhead = fixed manufacturing overhead /number of units= $250000/2000 =$125

Cost per unit of fixed selling and administrative expenses = fixed selling and administrative expenses /number of units = $55000/2000 = $27.5

Total fixed cost per unit = $125+$27.5 = $152.5

Total variable cost per unit =Direct material + direct labor + variable ...

Solution Summary

Solution shows computations of cost per unit of fixed manufacturing overhead fixed selling and administrative expenses, ROI per unit and markup percentages

$2.19