Brandon Company prices its products using a 50% markup on total manufacturing co
ID: 2498611 • Letter: B
Question
Brandon Company prices its products using a 50% markup on total manufacturing cost to cover selling and administrative expenses and to provide a reasonable return on investment.
Cost per Unit
Direct materials $34
Direct labor 20
Variable manufacturing overhead 27
Variable selling and administrative expenses 10
Fixed manufacturing overhead totals $200,000 per year. Fixed selling and administrative expenses are $100,000 per year. The average number of units sold per year is 10,000.
Using these data and the functional cost approach to pricing products, estimate the NORMAL SELLING PRICE. Note: The markup will end up being 50% of the selling price.
$152
$192
$212
$202
$172
$152
$192
$212
$202
$172
Explanation / Answer
Calculation of the Selling Price Direct Material 34 Direct labour 20 Variable Manufacturing Overhead 27 Selling and Admin Expenses 10 Total 91 Total 91*10000 910000 Fixed Manufacturing Overheads 200000 Selling and Admin Expenses 100000 Total 1210000 Per unit 1210000/10000 121 Mark up 121/3 41 Selling Price 162