Data

DM 1,125,000 Target Operating Income

DL 775,000
Man. Overhead
Variable 840,000
Fixed 645,000
Selling and Administrative
Variable 360,000
Fixed 480,000

1 The markup percentage for setting prices as a percentage of total manufacturing costs
Total cost 4,225,000
Target Operating Income 900,000

Markup Percentage 51.40% A Answer A

2 The markup percentage for setting prices as a percentage of variable manufacturing costs

Markup Percentage 87.04% B Answer B

3 The markup percentage for setting prices as a percentage of the variable cost of the product is

Markup Percentage 65.32% D Answer D

4  The markup percentage for setting prices as a percentage of the full cost of the product

Markup Percentage 21.30% D Answer D

5 Sail Safe

a. Target Cost

Price 55,000
Target Operating Income 20%

Target Cost 44,000

b. Change in Operating Income

Old operating income 27,000,000
New Operating Income 19,125,000
Change in Operating Income - 7,875,000 lower

c. Target cost to maintain same income level

Current income 27,000,000

Target cost 43,000
 900,000

f the product is