Q:

Rahma manufacturing LLC is a leading inverter manufacturing company in Oman. Mr. Zuwaid, who has recently joined as a production supervisor would like to calculate the total cost of producing 1000 invertors in a month. Records show that material cost of producing one inverter is RO 56 while labor cost per unit is RO 6 and other manufacturing cost is also RO 6 per unit. The company pays RO 4000 per month as a rent and Mr. Zuwaid found that there are no other expenses.

a) What will be the companys total cost of producing 1000 inverters

b) Al Maha electronics, a retailer buys 1000 inverters and Rahma LLC adds 20% as a rate of mark up on cost, what will be total purchasing price for Al Maha electronics?

c) Why do companies add mark up on cost? Discuss with reasons