Question

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 477,000 units.

		Per Unit			Total
Direct materials		$ 7
Direct labor		$13
Variable manufacturing overhead		$15
Fixed manufacturing overhead					$2,385,000
Variable selling and administrative expenses		$14
Fixed selling and administrative expenses					$954,000

The company has a desired ROI of 25%. It has invested assets of $26,712,000.

1.Compute the total cost per unit.

2. Compute the desired ROI per unit.

3.Compute the markup percentage using total cost per unit.

4.Compute the target selling price.

Answer 1

1
Direct materials	7.00
Direct labor	13.00
Variable manufacturing overhead	15.00
Fixed manufacturing overhead	5.00	=2385000/477000
Variable selling and administrative expenses	14.00
Fixed selling and administrative expenses	2.00	=954000/477000
Total cost per unit	56.00
2
Desired ROI per unit	14	=(26712000*25%)/477000
3
Desired ROI per unit	14.00
Divide by Total cost per unit	56.00
Markup Percentage using total cost per unit	25.00%
4
Desired ROI per unit	14
Add: Total cost per unit	56.00
Target Selling price	70.00