Dotterel Corporation uses the variable cost concept of product pricing. Below is cost information for the production and sale of 35,000 units of its sole product. Dotterel desires a profit equal to a 11.2% rate of return on invested assets of $350,000. Fixed factory overhead cost $105,000 Fixed selling and administrative costs 35,000 Variable direct materials cost per unit 4.34 Variable direct labor cost per unit 5.18 Variable factory overhead cost per unit .98 Variable selling and administrative cost per unit .70 The markup percentage for the sale of the company's product is: Group of answer choices 14% 5.6% 45.71% 11.2%

Dotterel Corporation

The markup percentage for the sale of the company's product is:

= 45.71%.

Explanation:

a) Data and Calculations:

Production and sales units = 35,000

Desired rate of return = 11.2%

Invested assets = $350,000

Desired profit = $39,200 ($350,000 * 11.2%)

Fixed factory overhead cost = $105,000

Fixed selling and administrative costs = $35,000

Total fixed costs = $140,000 ($105,000 + $35,000)

Variable direct materials cost per unit                  $4.34

Variable direct labor cost per unit                           5.18

Variable factory overhead cost per unit                0.98

Variable selling and administrative cost per unit  0.70

Total variable costs per unit                                $11.20

Total variable costs = $392,000 ($11.20 * 35,000)

Contribution margin:

Fixed costs =  $140,000

Desired profits  39,200

Total =            $179,200

Markup = 45.71% ($179,200/$392,000 * 100)

Sales revenue = $571,000

Selling price per unit = $16.31