If moody uses a markup percentage of 120% of its total manufacturing cost, then what selling price per unit would it have established for job 400?

1. Unit cost = $1, 040 / 52

   = $20

2. =$20 x (100% + 120%)

   =$44

Explanation:

Before we start answering the question, we need to have a clear understanding of what mark-up percentage is, and how it impacts on the manufacturing cost.

Mark-up: is the amount added to the cost price to cover the overheads and realize a profit.

A mark-up percentage is a percentage (%) that is used as a basis to determine the mark-up value.

For example, a seller may mark-up her costs by 25% to arrive at a selling price.

Seller cost price is $100 and has a mark-up policy of 25%; the selling price is then derived as follows:

=$100 x (100% + 25%)

=$100 x 125%

=$125

The full information relating to Moody is as follows:

During the years, Job 400 was started and completed. The following information was made available concerning Job 400:

Direct materials      $450

Direct labor             $210

Estimated manufacturing overhead costs   $950, 000

Estimated total machine hours                       100, 000

Machine hours used                                                  40

Compute the total manufacturing costs assigned to Job 400

If Job 400 includes 52 units, what is the unit cost for this job?

Costs incurred: Direct materials                                             $450

                         Direct labor                                                    $210

                         Overheads [$950, 000 / 100, 000] x 40     $380

                          Total Costs                                                   $1, 040      

Unit cost = $1, 040 / 52

   = $20

If Moody uses a mark-up of 120% of its total manufacturing costs, then what selling price per unit would it have to establish for Job 400?

=$20 x (100% + 120%)

=$44