Regular Company produces audio equipment, specifically headphones and speakers. A new CEO has just been hired and announces

a new policy that if a product cannot earn a markup of at least $25$ percent, it will be dropped. The markup is computed as product

gross profit divided by reported product cost.

Manufacturing overhead for year $1$ totaled $$1,002,000.$ Overhead is allocated to products based on direct materials cost. Data for year

$1$ show the following:

Required:

a$-1.$ Calculate the markup for both headphones and speakers.

$a*2.$ Based on the CFO's new policy, which of the two products should be dropped?

b$.$ Regardless of your answer in requirement $($a$),$ the CFO decides at the beginning of year $2$ to drop the speakers from the product

line. The company cost analyst estimates that overhead without the speaker line will be $$635,000.$ The revenue and costs for

headphones are expected to be the same as last year. What is the estimated markup for headphones in year $2?$

Complete this question by entering your answers in the tabs below.

Req A $1$

Req A$2$

Req B

Calculate the markup for both headphones and speakers. $($Enter your answers as a percentage rounded to $1$ decimal place

$($i$.$e$.,32\mathrm{.}1).)$

Complete this question by entering your answers in the tabs below.

Req A$1$

Req B

Regardless of your answer in requirement $($a$),$ the CFO decides at the beginning of year $2$ to drop the speakers from the

product line. The company cost analyst estimates that overhead without the speaker line will be $$635,000.$ The revenue and

costs for headphones are expected to be the same as last year. What is the estimated markup for headphones in year

$2?($Enter your answer as a percentage rounded to $1$ decimal place $($i$.$e$.,32\mathrm{.}1).)$Regular Company produces audio equipment, specifically headphones and speakers. A new CEO has just been hired and announces a new policy that if a product cannot earn a markup of at least $25$ percent, it will be dropped. The markup is computed as product gross profit divided by reported product cost.

Manufacturing overhead for year $1$ totaled $$1,002,000.$ Overhead is allocated to products based on direct materials cost. Data for year $1$ show the following:

Headphones Speakers

Sales revenue $ $2,262,850$ $ $2,156,000$

Direct materials $735,000935,000$

Direct labor $494,000254,000$

Required:

a$-1.$ Calculate the markup for both headphones and speakers.

a$-2.$ Based on the CFO's new policy, which of the two products should be dropped?

b$.$ Regardless of your answer in requirement $($a$),$ the CFO decides at the beginning of year $2$ to drop the speakers from the product line. The company cost analyst estimates that overhead without the speaker line will be $$635,000.$ The revenue and costs for headphones are expected to be the same as last year. What is the estimated markup for headphones in year $2?$