Rita Corporation produces commercial fertilizer spreaders. The following information is available for Rita's anticipated annual volume...

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:

Total cost per unit.

Desired ROI per unit.

Mark-up percentage using total cost per unit.

Target selling price.

Expert Solution

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

ekkarill92 answered 2 years ago

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