Privacy Window and Wall Treatments Company provides draperies, shades, and various window treatments. Privacy works with the customer to design the appropriate window treatment, places the order, and installs the finished product. Direct materials and direct labor costs are easy to trace to the jobs. Privacy's income statement for last year is as follows: Revenues      $236,500 Cost of goods sold:             Direct materials $120,615           Direct labor 40,205           Overhead 28,380    189,200 Gross profit      $47,300 Selling and administrative expenses      28,900      Operating income      $18,400 Privacy wants to find a markup on cost of goods sold that will allow them to earn about the same amount of profit on each job as was earned last year. Required: 1. What is the markup on cost of goods sold (COGS) that will maintain the same profit as last year? (Round to the nearest whole percent. Use this amount for future calculations.) fill in the blank 1 % of cost of goods sold 2. A customer orders draperies and shades for a remodeling job. The job will have the following costs: Direct materials $1,110 Direct labor 222 Applied overhead 111     Total cost $1,443 What is the price that Privacy will quote given the markup percentage calculated in Requirement 1? (Round the price to the nearest dollar.) $fill in the blank 2 3. What if Privacy wants to calculate a markup on direct materials cost, since it is the largest cost of doing business? What is the markup on direct materials cost that will maintain the same profit as last year? (Round to the nearest whole percent. Use this amount for future calculations.) fill in the blank 3 % of direct materials cost What is the bid price Privacy will use for the job given in Requirement 2 if the markup percentage is calculated on the basis of direct materials cost? (Round to the nearest dollar.) $fill in the blank 4

FINANCIAL ACCOUNTING
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Author:Libby
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Chapter1: Financial Statements And Business Decisions
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Markup on Cost, Job Pricing

Privacy Window and Wall Treatments Company provides draperies, shades, and various window treatments. Privacy works with the customer to design the appropriate window treatment, places the order, and installs the finished product. Direct materials and direct labor costs are easy to trace to the jobs. Privacy's income statement for last year is as follows:

Revenues      $236,500
Cost of goods sold:       
     Direct materials $120,615     
     Direct labor 40,205     
     Overhead 28,380    189,200
Gross profit      $47,300
Selling and administrative expenses      28,900
     Operating income      $18,400

Privacy wants to find a markup on cost of goods sold that will allow them to earn about the same amount of profit on each job as was earned last year.

Required:

1. What is the markup on cost of goods sold (COGS) that will maintain the same profit as last year? (Round to the nearest whole percent. Use this amount for future calculations.)
fill in the blank 1 % of cost of goods sold

2. A customer orders draperies and shades for a remodeling job. The job will have the following costs:

Direct materials $1,110
Direct labor 222
Applied overhead 111
    Total cost $1,443

What is the price that Privacy will quote given the markup percentage calculated in Requirement 1? (Round the price to the nearest dollar.)
$fill in the blank 2

3. What if Privacy wants to calculate a markup on direct materials cost, since it is the largest cost of doing business? What is the markup on direct materials cost that will maintain the same profit as last year? (Round to the nearest whole percent. Use this amount for future calculations.)
fill in the blank 3 % of direct materials cost

What is the bid price Privacy will use for the job given in Requirement 2 if the markup percentage is calculated on the basis of direct materials cost? (Round to the nearest dollar.)
$fill in the blank 4

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