Answer the following questions using the information below:
Oscar Corporation budgeted the following costs for the production of its one and only product for the next fiscal year:
Oscar has an annual target operating income of $900,000.
-The markup percentage for setting prices as a percentage of total manufacturing costs is:
A)51%
B)125%
C)185%
D)245%

Question

Answer the following questions using the information below:
Oscar Corporation budgeted the following costs for the production of its one and only product for the next fiscal year:
  Oscar has an annual target operating income of $900,000.
-The markup percentage for setting prices as a percentage of total manufacturing costs is:
A)51% 
B)125% 
C)185% 
D)245%

Quizplus · Accepted Answer

To determine the markup percentage, we need to first calculate the total manufacturing costs, which is $1,600,000. 
Markup percentage = (Target operating income / Total manufacturing costs) x 100%
Plugging in the numbers, we get 
Markup percentage = (900,000 / 1,600,000) x 100%
Markup percentage = 56.25%
However, we need to use the markup percentage as a percentage of total manufacturing costs, not total costs. Therefore, we need to adjust the markup percentage by dividing by (1 - markup percentage).
Adjusted markup percentage = 56.25% / (1 - 56.25%) = 51%
Therefore, the answer is A) 51%.

Answer the Following Questions Using the Information Below