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Cost-Based Pricing Decision Jeremy Costa, owner of Costa Cabinets Inc., is preparing a bid on a job that requires $1,800 of direct materials, $1,600 of

Cost-Based Pricing Decision

Jeremy Costa, owner of Costa Cabinets Inc., is preparing a bid on a job that requires $1,800 of direct materials, $1,600 of direct labor, and $800 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 years income statement is as follows:

Sales $130,000
Cost of goods sold 48,100
Gross margin $ 81,900
Selling and administrative expenses 46,300
Operating income $ 35,600

Required:

1. Calculate the markup that Jeremy will use. Round your answer to one decimal place. ________%

2. What is Jeremy's initial bid price? Round your answer to the nearest dollar. $________

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