Question

Exercise 21-05

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 508,000 units.

		Per Unit			Total
Direct materials		$ 7
Direct labor		$11
Variable manufacturing overhead		$17
Fixed manufacturing overhead					$3,048,000
Variable selling and administrative expenses		$16
Fixed selling and administrative expenses					$1,524,000

The company has a desired ROI of 25%. It has invested assets of $30,480,000.

Compute the total cost per unit.

Total cost per unit

$enter the total cost per unit in dollars

Compute the desired ROI per unit.

Desired ROI per unit

$enter the desired ROI per unit in dollars

Compute the markup percentage using total cost per unit.

Markup percentage using total cost per unit

enter the markup percentage using total cost per unit

%

Compute the target selling price.

Target selling price

$enter the target selling price in dollars

Answer 1

1
Direct materials	7
Direct labor	11
Variable manufacturing overhead	17
Fixed manufacturing overhead	6	=3048000/508000
Variable selling and administrative expenses	16
Fixed selling and administrative expenses	3	=1524000/508000
Total cost per unit	60
2
Desired ROI per unit	15	=(30480000*25%)/508000
3
Desired ROI per unit	15
Divide by Total cost per unit	60
Markup percentage using total cost per unit	25%
4
Desired ROI per unit	15
Add: Total cost per unit	60
Target Selling price	75