In: Accounting
Rita Corporation produces commercial fertilizer spreaders. The following information is available for Rita's anticipated annual volume of 600,000 units:
Per Unit Total
Direct materials $37
Direct labour 43
Variable manufacturing overhead 65
Fixed manufacturing overhead $15,000,000
Variable selling and administrative expenses 73
Fixed selling and administrative expenses 11,400,000
The company has a desired ROI of 20%. It has invested assets of $325,000,000.
Required:
Calculate each of the following:
a) | ||
Direct materials ($37*600000) | $ 2,22,00,000 | |
Drect labour ($43*600000) | $ 2,58,00,000 | |
Variable manufacturing overhead ($65*600000) | $ 3,90,00,000 | |
Fixed manufacturing overhead | $ 1,50,00,000 | |
Variable selling and administrative expenses ($73*600000) | $ 4,38,00,000 | |
Fixed selling and administrative expenses | $ 1,14,00,000 | |
Total Cost | $ 15,72,00,000 | |
Total Cost per unit =$157200000/600000 | ||
=$262 | ||
b) | ROI= $325000000*20% | |
=$65000000 | ||
Desired ROI per unit = $65000000/600000 | ||
=$108.33 | ||
c) | Mark-up % = 108.3333/262 | |
=41.35% | ||
d) | Target selling price = $262+108.33 | |
=$370.33 | ||