Lubi, Julie Marie Anne P.

BSA- A2C

Jeremy Costa, owner of Costa Cabinets Inc. is preparing a bid on a job that requires
P90,000 of direct materials, P80,000 of direct labor, and P40,000 of overhead.  Jeremy
normally applies a standard mark-up 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 statement is as follows:
 
                  Sales                                                           P6,500,000
                  Cost of goods sold                                         2,405,000
                      Gross margin                                             4,095,000
                  Selling and administrative expenses             2,315,000
                       Operating income                                     1,780,000
Required:
1.  Calculate the markup that Jeremy will use. (Use 1 decimal point for the markup
percentage.  Ex. 130.6%)

Mark-up % = ((Sales – COGS)/ COGS) x 100

Mark-up % = ((P6,500,000 – 2,405,000)/ 2,405,000) x 100
Mark-up % = ((P4,095,000)/ 2,405,000) x 100
Mark-up % = 170.3%

2.  What is Jeremy's initial bid price?

Bid Price = Total Cost + (Mark-up % x Total Cost)

Bid Price = (P90,000 + P80,000 + P40,000) + (170.3% x (P90,000 + P80,000 +
P40,000))
Bid Price = 210,000 + (170.3% x 210,000)
Bid Price = 210,000 + 357,630
Bid Price = P 567,630