Question

Sunland Corporation produces outdoor portable fireplace units. The following per unit cost information is available: direct materials $18, direct labor $22, variable manufacturing overhead $13, fixed manufacturing overhead $27, variable selling and administrative expenses $7, and fixed selling and administrative expenses $17. The company's ROI per unit is $16. Compute Sunland Corporation’s markup percentage using absorption-cost pricing. Absorption-cost pricing markup percentage % Compute Sunland Corporation’s markup percentage using variable-cost pricing. (Round answer to 2 decimal places, e.g. 10.50%.) Variable-cost pricing markup percentage %

Answer 1

Answer:

Mark-up;

Absorption costing=20%

Variable costing pricing  = 26.7%

Explanation:

Absorption costing values production units using full cost per unit.

Full cost per unit= Direct material cost + Direct Labour cost + Variable production overhead+ Fixed production overhead

Absorption costing =18 + 22+ 27+13= 80

Mark-up = ROi/cost per unit× 100

            = 16/80 ×100= 20%

Variable costing pricing

Here products are valued using the variable cost of production.

18 + 22+ 13+ 7= 60

Mark-up = 16/60× 100= 27%

Mark-up;

Absorption costing= 20%

Variable costing pricing  =26.7%