Posted: April 30th, 2016

# What would be the price for a product that has a cost of \$500, assuming that the markup is based on cost of goods sold?

What is the effect on income if Foster purchases the component from the outside supplier?
a. \$45,000 increase
b. \$15,000 increase
c. \$75,000 decrease
d. \$105,000 increase

11. Jamie Corporation had the following information:

Revenues \$250,000
Cost of goods sold:
Direct materials \$50,000
Direct labor 37,500
Gross profit \$100,000
Operating income \$ 62,500

What would be the price for a product that has a cost of \$500, assuming that the markup is based on cost of goods sold?
a. \$834
b. \$625
c. \$708
d. \$2,000

12. Gage Company had the following information:
Revenues \$600,000
Cost of Goods Sold 60%
What is the markup on Cost of Goods sold?
a. .1833
b. .6667
c. .3611
d. none of these

ANS: B
Support:
Cost of Goods Sold = .60 ? \$600,000 = \$360,000
Operating Income = \$600,000 – \$360,000 – \$130,000 = \$110,000
Markup on COGS = (selling and administrative expenses + operating income) / COGS
.6667 = (\$130,000 + \$110,000) / \$360,000

PTS: 1 DIF: Difficult OBJ: 18-2 NAT: AACSB Analytic

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