Question

Exercise 8-5 (Video) 

Schopp Corporation makes a mechanical stuffed alligator that sings the Martian national anthem. The following information is available for Schopp Corporation's anticipated annual volume of 484,000 units. 

	Per Unit	Total
Direct materials	$6
Direct labor	$13
Variable manufacturing overhead	$16
Fixed manufacturing overhead		$2,904,000
Variable selling and administrative expenses	$12
Fixed selling and administrative expenses		$1,452,000

The company has a desired ROI of 25%. It has invested assets of $27,104,000. 

Compute the total cost per unit. Total cost per units $_______ 

Compute the desired ROI per unit. Desired ROI per units $ _______ 

Answer 1

Solution:
Particulars	Calculation	$
direct material		6
direct labor		13
variable manufacturing overhead		16
fixed manufacturing overhead	2904000/484000	6
variable selling and administrative exp		12
fixed selling and administrative exp	1452000/484000	3
total cost per unit		56

computation of desired ROI per unit
Invested asset (a)	$       27,104,000
ROI (b)	25%
Target net income (a*b)	$          6,776,000
/ No of units	484000
ROI per unit	$                  14.00
computation of mark-up percentage
ROI per unit	$                  14.00
total cost per unit	$                  56.00
markup % (14/56)	25.00%

Target selling price= cost + mark up= 56+14=$70