Solution: | |||
a. | Variable cost per unit | 90 | A |
Fixed cost per unit | 30 | B | |
Total cost per unit | 120 | C=A+B | |
Working Notes: | |||
Variable cost per unit | |||
Direct materials | 21 | ||
Direct labor | 46 | ||
Variable manufacturing overhead | 15 | ||
Variable selling and administrative expenses | 8 | ||
Variable cost per unit | 90 | ||
Notes: | fixed cost per unit is the total fixed cost divided by total units | ||
Fixed cost per unit | A | B | |
Total costs | Volume | ||
Fixed manufacturing overhead | 1200000 | 80000 | |
Fixed selling and administrative expenses | 1200000 | 80000 | |
Fixed cost per unit | |||
Notes: | Total cost per unit is the total variable cost per unit and fixed cost per unit total sum. | ||
b. | Desired ROI $ | 48 | |
Working Notes: | |||
Markup percentage on total unit cost is 40% | |||
Total per unit as computed above | 120 | ||
Markup percentage | 40% | ||
Desired ROI $ | 48 | ||
[ cost per unit x markup % = 120 x 40% =48] | |||
c. | Target selling price | 168 | |
Working Notes: | |||
Target selling price is the price sum of markup and total cost per unit | |||
Total cost per unit | 120 | ||
Desired ROI per unit | 48 | ||
Target selling price | 168 | ||
d. | Variable cost per unit | 90 | A |
Fixed cost per unit | 40 | B | |
Total cost per unit | 130 | C=A+B | |
Desired ROI $ | 52 | ||
Target selling price | 182 | ||
Working Notes: | |||
Assuming 60,000 units are produced and sold then as above calculation will changed. | |||
Variable cost per unit | |||
Direct materials | 21 | ||
Direct labor | 46 | ||
Variable manufacturing overhead | 15 | ||
Variable selling and administrative expenses | 8 | ||
Variable cost per unit | 90 | ||
Notes: | fixed cost per unit is the total fixed cost divided by total units | ||
Fixed cost per unit | A | B | |
Total costs | Volume | ||
Fixed manufacturing overhead | 1200000 | 60000 | |
Fixed selling and administrative expenses | 1200000 | 60000 | |
Fixed cost per unit | |||
Notes: | Total cost per unit is the total variable cost per unit and fixed cost per unit total sum. | ||
Markup percentage on total unit cost is 40% | |||
Total per unit as computed above | 130 | ||
Markup percentage | 40% | ||
Desired ROI $ | 52 | ||
[ cost per unit x markup % = 130 x 40% =52] | |||
Target selling price is the price sum of markup and total cost per unit | |||
Total cost per unit | 130 | ||
Desired ROI per unit | 52 | ||
Target selling price | 182 | ||
Please feel free to ask if anything about above solution in comment section of the question. |
National Corporation needs to set a target price for its newly designed product M14-M16. The following data relate to t...
National Corporation needs to set a target price for its newly designed product M14-M16. The following data relate to this new product. Per Unit Total Direct materials $26 Direct labor Variable manufacturing overhead Fixed manufacturing overhead $1,377,000 Variable selling and administrative expenses $5 Fixed selling and administrative expenses $ 1,053,000 These costs are based on a budgeted volume of 81,000 units produced and sold each year. National uses cost-plus pricing methods to set its target selling price. The markup percentage...
National Corporation needs to set a target price for its newly designed product M14–M16. The following data relate to this new product. Per Unit Total Direct materials $23 Direct labor $38 Variable manufacturing overhead $12 Fixed manufacturing overhead $1,343,000 Variable selling and administrative expenses $ 7 Fixed selling and administrative expenses $ 1,027,000 These costs are based on a budgeted volume of 79,000 units produced and sold each year. National uses cost-plus pricing methods to set its target selling price....
National Corporation needs to set a target price for its newly designed product M14–M16. The following data relate to this new product. Per Unit Total Direct materials $30 Direct labor $44 Variable manufacturing overhead $11 Fixed manufacturing overhead $1,264,000 Variable selling and administrative expenses $ 5 Fixed selling and administrative expenses $ 1,106,000 These costs are based on a budgeted volume of 79,000 units produced and sold each year. National uses cost-plus pricing methods to set its target selling price....
National Corporation needs to set a target price for its newly
designed product M14–M16. The following data relate to this new
product.
Per Unit
Total
Direct materials
$26
Direct labor
$44
Variable manufacturing overhead
$15
Fixed manufacturing overhead
$1,377,000
Variable selling and administrative expenses
$ 5
Fixed selling and administrative expenses
$ 1,053,000
These costs are based on a budgeted volume of 81,000 units produced
and sold each year. National uses cost-plus pricing methods to set
its target selling price....
National Corporation needs to set a target price for its newly designed product M14–M16. The following data relate to this new product. Per Unit Total Direct materials $30 Direct labor $44 Variable manufacturing overhead $11 Fixed manufacturing overhead $1,264,000 Variable selling and administrative expenses $ 5 Fixed selling and administrative expenses $ 1,106,000 These costs are based on a budgeted volume of 79,000 units produced and sold each year. National uses cost-plus pricing methods to set its target selling price....
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