Question

Lafleur Corporation needs to set a target price for its newly designed product, M14-M16. The following data relate to it:

		Per Unit		Total
Direct materials		$15
Direct labour		17
Variable manufacturing overhead		13
Fixed manufacturing overhead				$3,179,000
Variable selling and administrative expenses		3
Fixed selling and administrative expenses				2,023,000

These costs are based on a budgeted volume of 289,000 units produced and sold each year. Lafleur uses cost-plus pricing to set its target selling price. The markup on the total unit cost is 40%.

Calculate the total variable cost per unit, total fixed cost per unit, and total cost per unit for M14-M16.

Total variable cost per unit		$
Total fixed costs per unit		$
Total cost per unit		$

Calculate the desired markup per unit for M14-M16.

Markup per unit

$

Calculate the target selling price for M14-M16.

Target selling price

$

Assuming that 231,200 M14-M16s are produced during the year, calculate the variable cost per unit, fixed cost per unit, and total cost per unit

Total variable cost per unit		$
Total fixed costs per unit		$
Total cost per unit		$

Answer 1

1. calculation of total variable cost unit

direct material = 15

direct labour = 17

varible manufacturing overhead = 13

variable selling and administrative expense = 3

total variable cost unit = $ 48

2. calculation of total fixed cost per unit

total fixed manufacturing overhead = 3179,000

total  fixed selling and administrative expenses = 2023,000

total fixed cost = 5202,000

totol budgeted volume= 289,000

total fixed cost per unit = total fixed cost/ total budgeted volume

total fixed cost per unit = 5202,000/289,000

total fixed cost per unit = $ 18

total variable cost unit = $ 48

total fixed cost per unit = $ 18

total cost per unit = $ 66

2. desired markup per unit = 40%

markup per unit = total cost per unit * mark up %

markup per unit = 66 * 40% = $ 26.4

3. target selling price= mark up per unit + total cost per unit

target selling price= 26.4 + 66 = $ 92.4

4. calculation for cost of 231,2000 units

total variable cost per unit = $ 48 (as calculated above , variable cost remains same as it is not dependent on production )

NOTE : fixed cost will be changed as there is change in units produced , so it will be absorbed on 231,200 units

total fixed cost = 5202,000

total units produced = 231,200 units

total fixed cost per unit =   total fixed cost/total units produced

total fixed cost per unit = 5202000/231200 = $ 22.5

total variable cost per unit = $ 48

total fixed cost per unit = 5202000/231200 = $ 22.5

total cost per unit = $ 70.5