Question

Question 1 Gibbs Corporation produces industrial robots for high-precision manufacturing. The following information is given for Gibbs Corporation. Per Unit Total Direct materials $420 $300 $ 76 Direct labor Variable manufacturing overhead Fixed manufacturing overhead Variable selling and administrative expenses Fixed selling and administrative expenses $1,602,300 $ 57 $ 559,170 The company has a desired ROI of 22%. It has invested assets of $53,955,000. It anticipates production of 3,270 units per year.

1)Compute the cost per unit of the fixed manufacturing overhead and the fixed selling and administrative expenses.

2) Compute the desired ROI per unit. (Round answers to 0 decimal places.)

3) Compute the target selling price.

Answer 1

1.) Fixed manufacturing overhead cost per unit

= 1,602,300/3,270 = $490 per unit

  Fixed selling and administrative expenses per unit

= 559,170/3,270 = $171 per unit

2.) ROI per unit = (Invested Capital x ROI)/total units

= (53,955,000 x 22%)/3,270 = $3,630 per unit

3.) Target selling price

= Direct Material + direct labor + variable manufacturing overhead + fixed manufacturing overhead + variable selling and administrative expenses + fixed selling and administrative expenses + desired profit

= 420 + 300 + 76 + 490 + 57 + 171 + 3,630

= $5,144 per unit