Goshawks Co. produces an automotive product and incurs total manufacturing costs of $2,600,000 in the production of 80,000 units. The company desires to earn a profit equal to a 12% rate of return on assets of $960,000. Total selling and administrative expenses are $105,000.
Required:
a. Calculate markup percentage, using the product cost concept. Rpund to one decimal place. b. Compute the price of the automotive product. Round your answer to two decimal places.

Explanation:

Computation A:  

Product Cost Markup = Desire to Earn Profit + Total Selling

Desired to Earn profit = $960,000 × 12%

Desired to Earn profit = $115,200

Product Cost Markup = Desire to Earn Profit + Total Selling  

Product Cost Markup = $115200 + $105000

Product Cost Markup = $220,200

Percentage Markup =  Product Cost Markup /  Incur Total Manufacturing Cost

Percentage Markup = $220200 / $2600000

Percentage Markup = 8.5%

Computation B:

Per Unit Cost =  $2,600,000 / 80000

Per Unit Cost = $32.5

Price of Product = $32.5 + ($32.5 × 8.5%)

Price of Product = $35.26

a. Calculate markup percentage, using the product cost concept. Rpund to one decimal place.

To calculate the markup percentage using the product cost concept. We will use the formula,

Markup Percentage = (Desired Profit + Total Selling and Administrative Expenses ) / Total Manufacturing Costs

Given in the Question is,

Desired Profit = 12% rate of return on assets of $960,000

Total Selling and Administrative Expenses  = $105,000

Total Manufacturing Costs  = $2,600,000

Substituting in the formula,

= ($960,000 x 12% + $105,000) /  $2,600,000

= ($115,200 + $105,000) /  $2,600,000

= $220,200 / $2,600,000

= 0.0846 = 8.46% is the markup percentage.

b. Compute the price of the automotive product. Round your answer to two decimal places.

Manufacturing Cost amount per unit                  $32.50

($2,600,000 / 80,000 units)                      

Markup ($32.50 x 8.46%)                                  2.75

Selling price                                                       $35.25

The price of the automotive product is $35.25.

month 1 start amount =$3287.90 interest=(3287.90x0.0145/12)3.97 total to pay=$3291.81 paid =$1200 balance =$2,091.87

month 2 starting amount= $2,091.87 interest =$25.28 total to pay =$2117.15 paid =$1200 balance $917.15

month 3 starting amount =$917.15 interest =$11.08 total to pay =$928.23 paid =$928.23 balance =$0 total to pay 1200+1200+928.23 = $3328.23 it will take 3 months to pay a total of $3328.23

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