Premium Company makes cardboard boxes. During the most recent accounting period Premium paid $60,000 for raw materials, $48,000 for labor, and $52,000 for overhead costs that were incurred to make boxes. Premium Company started and completed 400,000 boxes. Premium desires to earn a gross margin that is equal to 40% of product cost. Based on this information the selling price per box is: a. $0.40 b. $0.56 c. $0.50 d. $0.70

The correct answer is B.

Explanation:

Giving the following information:

Raw material = $60,000

Direct labor = $48,000

Overhead = $52,000

Premium Company started and completed 400,000 boxes.

First, we need to calculate the total manufacturing cost and unitary cost:

Total cost = Direct material + direct labor + overhead

Total cost = 60,000 + 48,000 + 52,000 = 160,000

Unitary cost = 160,000/400,000 = $0.4 per box

Now, we can calculate the selling price:

Selling price = Unitary cost*mark up = 0.4*1.40 = $0.56