Question

Martin Company is considering the introduction of a new product. To determine a selling price, the company has gathered the following information: . Number of units to be produced and sold each year Unit product cost Projected annual selling and administrative expenses Estimated investment required by the company Desired return on investment (ROI) 17,000 $ 50 $ 60,000 $550,000 18% The company uses the absorption costing approach to cost-plus pricing, Required: 1. Compute the markup required to achieve the desired ROI. (Round your Required ROI answers to the nearest whole percentage (ie, 0.1234 should be entered as 12). Round your "Markup Percentage" answers to 2 decimal places (i.e., 0.1234 should be entered as 12.34.)) Markup percentage 2. Compute the selling price per unit. (Round your intermediate and final answers to 2 decimal places. Unit product cost Markup Selling price per unit

Answer 1

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Solution: (550000*18%)+60000 Required ROI Investment Selling and Admin Expense Total Production Cost Unit product cost per unit Unit sales Total Sales Markup Percentage 18% 550000 60000 159000 50 17000 850000 18.71% (162500/640000) 2) Unit product cost Mark up (50*18.71%) Selling price per unit $ 50.00 $ 9.36 Or: $ 59.36 Or: due to rounding off: 9.35 59.35