Yelk Garage uses time and materials pricing. It is setting prices for next year using the following information: Labor rate, including fringe benefits $ 63 per hour Annual labor hours 3,100 hours Annual materials purchases $ 836,000 Materials purchasing, handling, and storage $ 41,800 Overhead for depreciation, taxes, insurance, etc. $ 77,500 Target profit margin for both labor and materials 25 % What should Yelk set as the materials markup per dollar of materials used

Question

Business

Hana Graves

7 January, 07:08

Yelk Garage uses time and materials pricing. It is setting prices for next year using the following information: Labor rate, including fringe benefits $ 63 per hour Annual labor hours 3,100 hours Annual materials purchases $ 836,000 Materials purchasing, handling, and storage $ 41,800 Overhead for depreciation, taxes, insurance, etc. $ 77,500 Target profit margin for both labor and materials 25 % What should Yelk set as the materials markup per dollar of materials used

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Benjamin Cohen · Answer 1

30%

Explanation:

Material purchasing, handling and storage cost = $ 41,800

Material purchasing percentage:

= Material purchasing, handling and storage cost : Annual materials purchases

= ($41,800 : $836,000) * 100

= 5%

Target profit margin for both labor and materials = 25%

Material markup per dollar of material:

= Material purchasing percentage + Target profit margin

= 5% + 25%

= 30%