Question

Lovell Computer Parts Inc. is in the process of setting a selling price on a new component it has just designed and developed. The following cost estimates for this new component have been provided by the accounting department for a budgeted volume of 55,000 units. Per Unit Total Direct materials $54 Direct labor $22 Variable manufacturing overhead $23 Fixed manufacturing overhead $550,000 Variable selling and administrative expenses $13 Fixed selling and administrative expenses $275,000 Lovell Computer Parts management requests that the total cost per unit be used in cost-plus pricing its products. On this particular product, management also directs that the target price be set to provide a 22% return on investment (ROI) on invested assets of $1,000,000.

Compute the markup percentage and target selling price that will allow Lovell Computer Parts to earn its desired ROI of 22% on this new component. (Round markup percentage to 2 decimal places, e.g. 10.50%.) Markup percentage % Target selling price $

Assuming that the volume is 44,000 units, compute the markup percentage and target selling price that will allow Lovell Computer Parts to earn its desired ROI of 22% on this new component. (Round answers to 2 decimal places, e.g. 10.50% or 10.50.) Markup percentage % Target selling price $ Click if you would like to Show Work for this question: Open Show Work

Answer 1

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