A Company Expects to Produce and Sell 9,000 Units of a Single

question 15

Multiple Choice

A company expects to produce and sell 9,000 units of a single product.Management desires an 18% return on assets of $1,750,000.The following additional company information is available: $\begin{array}{lr} \text { Variable costs (per unit) } \\ \text {Production costs } &\$ 79 \\ \text { Nonproduction costs } &\$ 5 \\ \text { Fixed costs (in total) } \\ \text {Overhead } &\$ 279,000 \\ \text { Nonproduction } &\$ 90,000\end{array}$ Compute markup per unit.Assume that markup percentage equals desired profit divided by total costs.

• A)$35
• B)$84
• C)$110
• D)$125
• E)$160

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Definitions:

High-Low Method

An accounting technique used to estimate variable and fixed costs associated with a business activity by analyzing the highest and lowest levels of activity.

Scatter Diagram

A graphical representation used to show the relationship between two variables, often used in statistics and quality control to identify potential correlations.

Degree of Operating Leverage (DOL)

A measure of how much a company's operating income will change in response to a change in sales, indicating the company's sensitivity to changes in business volume.

Total Contribution Margin

The difference between sales revenue and variable costs of production, indicating how much revenue contributes toward covering fixed costs and generating profit.