Question:

Neptune Transport Company makes per carriers, the Cat-allac. It is made of plastic with metal doors. Information for the product for the month of October is given in the following tables:

Input Prices

Direct Materials

Plastic $4.5 per pound

Metal $ 3 per pound

Direct Manufacturing Labor $11 per direct manufacturing labor hours Manufacturing Overhead Rate $20.5 per direct manufacturing labor hours

Input Quantities per unit of output

Cal-allac

Direct Materials

Plastic 5 Pounds

Metal 1 Pounds

Direct Manufacturing Labor 3 Hours

Inventory Information, direct materials

Plastic Metal

Beginning inventory 200 Pounds 75 Pounds

Target ending inventory 280 Pounds 80 pounds

Cost of beginning inventory $940 $240

Production & Inventory Information, finished goods

Cal-allac

Units of finished goods to be produced 520

Units of finished goods to be sold 500

Target ending inventory in units 50

Beginning inventory in units 30

Beginning inventory in dollars $3,150

Other Information:

Current Assets $160,000

Long-Term Assets 340,000

Budgeted operating income 10,000

Markup Percentage on Full Cost 11.63%

Instructions:

I. Calculate Neptunes rate of return on investment. Compute the selling price for Cal-allac if Neptune charge 60% mark-up on its unit product cost. (1+2)

II. Assume that apart from direct materials, direct labor and 50% of itsMOH cost, other variable costs that Neptune incur per unit is $ 31.25. Calculate Neptunes mark-up percentage on variable cost per unit (3).