Question

Problem 8-2A (Video) Lovell Computer Parts Inc. Is in the process of setting a selling price on a new component it has just designed and developed. The following cost estimates for this new component have been provided by the accounting department for a budgeted volume of 45,000 units Per Unit Total Direct materials $49 Direct labor $22 Variable manufacturing averhead $23 Fixed manufacturing averhead $540,000 Varlable selling and administrative expenses $22 Fixed selling and administrative expenses $405,000 Lovell Computer Parts management requests that the total cost per unit be used in cost-plus pricing its products. On this particular product, management also directs that the target price be set to provide a 18 % return on investment (ROI) assets of s1,000,000 invested Campute the markup percentage and target selling price that will allaw Lovell Camputer Parts to earn its desired ROI of 18% on this new camponent. (Round markup percentage to 2 decimal places, e.g. 10.50 % .) Markup percentage Target selling price Assuming that the volume Is 36,000 units, compute the markup percentage and target sell ng price that will allow Lovell Computer Parts to eam Its desired ROI of 18 % on this new component. (Round answers to 2 declmal places, e.g. 10.50% or 10.50.) Markup percentage Target selling price Click if you would like to Show Work for this question: Onen Show Work

Answer 1

1
Direct materials	49
Direct labor	22
Variable manufacturing overhead	23
Fixed manufacturing overhead	12	=540000/45000
Variable selling and administrative expenses	22
Fixed selling and administrative expenses	9	=405000/45000
Total cost per unit	137
Desired ROI per unit	4	=(1000000*18%)/45000
Desired ROI per unit	4
Divide by Total cost per unit	137
Markup Percentage	2.92%
Desired ROI per unit	4
Add: Total cost per unit	137
Target Selling price	141
2
Direct materials	49.00
Direct labor	22.00
Variable manufacturing overhead	23.00
Fixed manufacturing overhead	15.00	=540000/36000
Variable selling and administrative expenses	22.00
Fixed selling and administrative expenses	11.25	=405000/36000
Total cost per unit	142.25
Desired ROI per unit	5.00	=(1000000*18%)/36000
Desired ROI per unit	5.00
Divide by Total cost per unit	142.25
Markup Percentage	3.51%
Desired ROI per unit	5.00
Add: Total cost per unit	142.25
Target Selling price	147.25