Question

Required: 1. Determine the price for the part using a markup of 45% of full manufacturing cost. 2. Determine the price for the part using a markup of 23% of full life-cycle cost. 3. Determine the price for the part using a desired gross margin percentage to sales of 43%. 4. Determine the price for the part using a desired life-cycle cost margin percentage to sales of 20%. 5. Determine the price for the part using a desired before-tax return on investment of 12%. 6. Determine the total contribution margin and total operating profit for each of the methods in requirements 1 through 5. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Required 4 Required 5 Required 6 Determine the total contribution margin and total operating profit for each of the methods in requirements 1 through 5. (Round your intermediate calculations to 4 decimal places and final answers to the nearest whole dollar amount.) Contribution Margin Operating Profit Method Markup on full manufacturing cost Markup on life cycle costs Price to achieve desired GM % Price to achieve desired LCC % Price to achieve desired ROA of 12% < Required 5 Required 6

Please Highlight the final answer

Answer 1

Total Variable Costs	$        5,519,650	=4672000+847650
Total Fixed Costs	$        3,357,370	=2337875+667495+352000
Total Manufacturing Cost	$        7,361,875	=4672000+2337875+352000
Total Selling and Administrative Expenses	$        1,515,145	=847650+667495
Total Life Cycle Cost	$        8,877,020	=4672000+847650+2337875+667495+352000
Per unit Manufacturing Cost	$         136.3310	=7361875/54000
Per unit Life Cycle Cost	$         164.3893	=8877020/54000

1. Price using 45% markup f total manufacturing cost = $7361875 x 1.45 / 54000 = $197.6800

2. Price using 23% markup of total life cycle cost = $8877020 x 1.23 / 54000 = $202.1988

3. Price using desired gross margin percentage of 43% = $136.3310 / (1-0.43) = $239.1772

4. Price = $164.3893 / (1-0.20) = $205.4866

5. Price = $164.3893 / (1-0.30202) = $235.5215
Where: .30202 = ($22,342,000 x .12) / (54000 x $164.3893)

6.
(1)

Sales Revenue	$      10,674,720	=54000*197.68
Total Variable Costs	$        5,519,650
Contribution Margin	$        5,155,070
Total Fixed Costs	$        3,357,370
Net Operating Income	$        1,797,700

(2)

Sales Revenue	$      10,918,735	=54000*202.1988
Total Variable Costs	$        5,519,650
Contribution Margin	$        5,399,085
Total Fixed Costs	$        3,357,370
Net Operating Income	$        2,041,715

(3)

Sales Revenue	$      12,915,569	=54000*239.1772
Total Variable Costs	$        5,519,650
Contribution Margin	$        7,395,919
Total Fixed Costs	$        3,357,370
Net Operating Income	$        4,038,549

(4)

Sales Revenue	$      11,096,276	=54000*205.4866
Total Variable Costs	$        5,519,650
Contribution Margin	$        5,576,626
Total Fixed Costs	$        3,357,370
Net Operating Income	$        2,219,256

(5)

Sales Revenue	$      12,718,161	=54000*235.5215
Total Variable Costs	$        5,519,650
Contribution Margin	$        7,198,511
Total Fixed Costs	$        3,357,370
Net Operating Income	$        3,841,141