Cornerstone Exercise 2.

1 Markup on Cost, Job Pricing

Ventana Window and Wall Treatments Company

Required:

1. What is the markup on cost of goods sold (COGS) that will maintain the same profit
as last year? (Round the percentage to two significant digits)

Markup on COGS = (Selling and administrative expenses + Operating income) / COGS

Markup on COGS = (32,000 + 16,700) / 178,000
Markup on COGS = 0.27 or 27%

2. What is the price that Ventana will quote the given the markup percentage calculated
in Requirement 1? (Round the price to the nearest dollar.)

Job price = $1, 655 x 1.27

Job price = $2,102

3. Requirement 1:

Markup on Direct materials = (Direst labor + Overhead + Selling and administrative

expenses + Operating income) / Direct material
Markup on Direct materials = (38,000 +26,000 + 32,000 + 16,700) / 114,000
Markup on Direct materials = 112,700 / 114,000
Markup on Direct materials = 0.99 or 99%

Requirement 2:

Job price = $1,230 x 1.99

Job price = $2,448