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Cost-Based Pricing Decision

Jeremy Costa, owner of Costa Cabinets Inc., is preparing a bid on a job that requires $2,430 of direct materials, $2,430 of direct labor, and $1,215 of overhead. Jeremy normally applies a standard markup based on cost of goods sold to arrive at an initial bid price. He then adjusts the price as necessary in light of other factors (e.g., competitive pressure). Last year’s income statement is as follows:

Required:

1. Calculate the markup that Jeremy will use.%

2. What is Jeremy's initial bid price?$

Sales

$195,000

Cost of goods sold

58,500

 

Gross margin

$136,500

Selling and administrative expenses

46,300

 

Operating income

$90,200

     

 

Solution
5 (1 Ratings )

Solved
Finance 2 Weeks Ago 7 Views
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