Solution - Luxor Cosmetics - Calculate the variable...

Info icon This preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
Calculate the variable manufacturing cost as a percentage of the selling price for each product line for 2008 and for 2010. What mark-up on variable manufacturing cost did the firm use to establish the selling prices for each of the three product lines in 2008? In 2010? YEAR 2008 Lipstick Nail Polish Creams Total Variable Manufacturing Cost 16.80 10.50 2.80 30.10 Sales 19.00 13.00 5.60 37.60 Percentage of selling price 88.42% 80.77% 50.00% 80.05% Mark up 11.58% 19.23% 50.00% 19.95% YEAR 2010 Lipstick Nail Polish Creams Total Variable Manufacturing Cost 15.30 9.30 3.30 27.90 Sales 16.50 11.20 6.40 34.10 Percentage of selling price 92.73% 83.04% 51.56% 81.82% Mark up 7.27% 16.96% 48.44% 18.18% Provide the calculation that converts the wholesale selling price (WSP) of the 12/31/2008 lipstick inventory shown as $11.5 million in Schedule A of Exhibit 1 to the “cost” of $9.7 million shown in Schedule B of Exhibit 1. Sale Value of the units produced (a) 21.00 Average production cost (b) 17.80 Percentage (a) x (b) = c 84.8% Inventory at 12/31/2008 (as per Schedule a) 11.50 "Cost" as shown in Schedule B 9.7 (11.5 x 84.8%) Assuming the variable manufacturing cost per unit stayed the same in 2009 and 2010, did the sales volume of nail polish (in terms of physical units) increase or decrease after the selling price was reduced in 2010? Explain. The sale volume of the physical units of the product is not dependent on the variable cost per units of the product. The variable cost would be incurred as per the number of units sold. So even in case, the variable cost per units is same; it’s not going to impact the physical unit sale of the nail polish.
Image of page 1

Info icon This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Image of page 2
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern