Randy Azarski, a building contractor, builds houses in tracts, often building as many as 20 homes simultaneously. Azarski has budgeted costs for an expected number of houses in 20X0 as follows:

The job construction overhead includes approximately €800,000 of fixed costs, such as the salaries of supervisors and depreciation on equipment. The selling and administrative costs include €500,000 of variable costs, such as sales commissions and bonuses that depend fundamentally on overall profitability. Azarski wants an operating income of €1.5 million for 20X0. Compute the average target markup percentage for setting prices as a percentage of the following:

1. Direct materials plus direct labour.

2. The full ‘cost of jobs.

3. The variable ‘cost of jobs.

4. The full ‘cost of jobs’ plus selling and administrative costs.

5. The variable ‘cost of jobs’ plus variable selling and administrative costs.

Transcribed Image Text:

Direct materials Direct labour Job construction overhead Cost of jobs Selling and administrative costs Total costs €3,500,000 1,000,000 1,500,000 €6,000,000 1,500,000 €7,500,000