Answer :
Total manufacturing cost is $700,000. To determine the selling price per unit using different methods, let's calculate the manufacturing cost, total variable cost, and full cost first.
Manufacturing cost:
Direct material: $300,000
Direct labor: $240,000
Manufacturing overhead (50% fixed): $160,000
Total manufacturing cost: $300,000 + $240,000 + $160,000 = $700,000
Total variable cost:
Direct material: $300,000
Direct labor: $240,000
Manufacturing overhead (50% fixed): $160,000
Miscellaneous supplies: $5,000
Total variable cost: $300,000 + $240,000 + $160,000 + $5,000 = $705,000
Full cost:
Total manufacturing cost: $700,000
Selling and administration (80% fixed): $250,000
Full cost: $700,000 + $250,000 = $950,000
(a) Selling price with a margin of 25% on manufacturing cost:
Margin on manufacturing cost: 25% of $700,000 = $175,000
Selling price per unit: ($700,000 + $175,000) / 10,000 = $87.50
(b) Selling price with a mark-up of 30% on total variable cost:
Mark-up on total variable cost: 30% of $705,000 = $211,500
Selling price per unit: ($705,000 + $211,500) / 10,000 = $91.55
(c) Selling price with a margin of 20% on full cost:
Margin on full cost: 20% of $950,000 = $190,000
Selling price per unit: ($950,000 + $190,000) / 10,000 = $114.00
Therefore, using the different methods, the selling price per unit would be:
(a) $87.50 with a margin of 25% on manufacturing cost
(b) $91.55 with a mark-up of 30% on total variable cost
(c) $114.00 with a margin of 20% on full cost.
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Total manufacturing cost is $700,000. To determine the selling price per unit using different methods, let's calculate the manufacturing cost, total variable cost, and full cost first.
Manufacturing cost:
Direct material: $300,000
Direct labor: $240,000
Manufacturing overhead (50% fixed): $160,000
Total manufacturing cost: $300,000 + $240,000 + $160,000 = $700,000
Total variable cost:
Direct material: $300,000
Direct labor: $240,000
Manufacturing overhead (50% fixed): $160,000
Miscellaneous supplies: $5,000
Total variable cost: $300,000 + $240,000 + $160,000 + $5,000 = $705,000
Full cost:
Total manufacturing cost: $700,000
Selling and administration (80% fixed): $250,000
Full cost: $700,000 + $250,000 = $950,000
(a) Selling price with a margin of 25% on manufacturing cost:
Margin on manufacturing cost: 25% of $700,000 = $175,000
Selling price per unit: ($700,000 + $175,000) / 10,000 = $87.50
(b) Selling price with a mark-up of 30% on total variable cost:
Mark-up on total variable cost: 30% of $705,000 = $211,500
Selling price per unit: ($705,000 + $211,500) / 10,000 = $91.55
(c) Selling price with a margin of 20% on full cost:
Margin on full cost: 20% of $950,000 = $190,000
Selling price per unit: ($950,000 + $190,000) / 10,000 = $114.00
Therefore, using the different methods, the selling price per unit would be:
(a) $87.50 with a margin of 25% on manufacturing cost
(b) $91.55 with a mark-up of 30% on total variable cost
(c) $114.00 with a margin of 20% on full cost.
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