Question

Gibbs Corporation produces industrial robots for high-precision manufacturing. The following information is given for Gibbs Corporation....

Gibbs Corporation produces industrial robots for high-precision manufacturing. The following information is given for Gibbs Corporation.

Per Unit Total
Direct materials $440
Direct labor $310
Variable manufacturing overhead $  77
Fixed manufacturing overhead $1,983,600
Variable selling and administrative expenses $  59
Fixed selling and administrative expenses $  605,340


The company has a desired ROI of 19%. It has invested assets of $66,348,000. It anticipates production of 3,420 units per year.

Compute the target selling price.

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Answer #1
Direct materials 440
Direct labor 310
Variable manufacturing overhead 77
Fixed manufacturing overhead 580 =1983600/3420
Variable selling and administrative expenses 59
Fixed selling and administrative expenses 177 =605340/3420
Total cost per unit 1643
Desired ROI per unit 3686 =(66348000*19%)/3420
Desired ROI per unit 3686
Add: Total cost per unit 1643
Target Selling price 5329
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