Question

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		$36
Variable manufacturing overhead		$14
Fixed manufacturing overhead					$1,264,000
Variable selling and administrative expenses		$ 7
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. The markup percentage on total unit cost is 50%.

Compute the total variable cost per unit, total fixed cost per unit, and total cost per unit for M14–M16.

Variable cost per unit		$enter a dollar amount
Fixed cost per unit		enter a dollar amount
Total cost per unit		$enter a total of the two previous amounts

eTextbook and Media

  

  

Compute the desired ROI per unit for M14–M16.

Desired ROI

$enter the desired ROI per unit in dollars

per unit

eTextbook and Media

  

  

Compute the target selling price for M14–M16.

Target selling price per unit

$enter the target selling price per unit in dollars

eTextbook and Media

  

  

Compute variable cost per unit, fixed cost per unit, and total cost per unit assuming that 59,250 M14–M16s are produced and sold during the year.

Variable cost per unit		$enter a dollar amount
Fixed cost per unit		enter a dollar amount
Total cost per unit		$enter a total of the two previous amounts

Answer 1

Compute the total variable cost per unit, total fixed cost per unit, and total cost per unit for M14–M16.

Total Cost Per Unit = Total Variable cost per unit + Total Fixed cost per unit

= $80 + $30

= $110

________________________________________________________________________

Compute the desired ROI per unit for M14–M16.

Desired ROI = Total cost per unit   Markup percentage

= $110 50%

= $55

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Compute the target selling price for M14–M16.

Target Selling Price = Total cost per unit + Desired ROI per unit

= $110 + $55

= $165

_____________________________________________________________________________

Compute variable cost per unit, fixed cost per unit, and total cost per unit assuming that 59,250 M14–M16s are produced and sold during the year.

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