131. Jamison Company produces and sells Product X at a total cost of $25 per unit, of which $15 is product cost and $10 is selling and administrative expenses. In addition, the total cost of $25 is made up of $14 variable cost and $11 fixed cost. The desired profit is $5 per unit. Determine the markup percentage on total cost.
132. Finch, Inc. has bought a new server and is having to decide what to do with the old one. The cost of the old server was originally $60,000 and has been depreciated $45,000. The company has received two offers that it must consider. One offer was made to purchase the equipment outright for $18,500 less a 5% sales commission. The other offer was to lease the equipment for $7,000 for the next five years but the company will be required to provide maintenance and insurance totaling $3,000 per year. What offer should Finch, Inc. accept?
Differential revenue:
Revenue from lease ($7,000 ´ 5 years)$ 35,000
Revenue from sale18,500
Differential revenue from lease$ 16,500
133. Gull Corp. is considering selling its old popcorn machine and replacing it with a newer one. The old machine originally cost $5,000 and has been fully depreciated. Annual costs are $4,000. A high school is willing to buy it for $2,000. New equipment would cost $18,000 and annual operating costs would be $1,500. Both machines have an estimated useful life of 5 years. Should the machine be replaced? Support your answer with calculations.
The machine should not be replaced:
Proposal to Replace Equipment
134. Lark Art Company sells unfinished wooden decorations at a price of $15.00. The current profit margin is $5.00 per decoration. The company is considering taking individual orders and customizing them for sale. To finish the decoration the company would have to pay additional labor of $3.00, additional materials costing an average of $4.00 per unit and fixed costs would increase by $1,500. If the company estimates that it can sell 600 units for $25.00 each month, should they start taking the orders?
135. Using the variable cost concept determine the selling price for 30,000 units using the following data: Variable cost per unit $15.00, total fixed costs $90,000 and desired profit $150,000.
Markup Percentage = Desired Profit + Total Fixed Costs
Total Variable Costs