Question
Lovell Computer Parts Inc. is in the process of setting a selling price on a new...
Lovell Computer Parts Inc. is in the process of setting a selling price on a new component it has just designed and developed. The following cost estimates for this new component have been provided by the accounting department for a budgeted volume of 50,000 units.
| Per Unit | Total | ||||||
| Direct materials | $48 | ||||||
| Direct labor | $25 | ||||||
| Variable manufacturing overhead | $22 | ||||||
| Fixed manufacturing overhead | $700,000 | ||||||
| Variable selling and administrative expenses | $15 | ||||||
| Fixed selling and administrative expenses | $250,000 | ||||||
Lovell Computer Parts management requests that the total cost per
unit be used in cost-plus pricing its products. On this particular
product, management also directs that the target price be set to
provide a 30% return on investment (ROI) on invested assets of
$1,000,000.
Compute the markup percentage and target selling price that will allow Lovell Computer Parts to earn its desired ROI of 30% on this new component. (Round markup percentage to 2 decimal places, e.g. 10.50%.)
| Markup percentage | % | ||
| Target selling price | $ |
eTextbook and Media
Assuming that the volume is 40,000 units, compute the markup percentage and target selling price that will allow Lovell Computer Parts to earn its desired ROI of 30% on this new component. (Round answers to 2 decimal places, e.g. 10.50% or 10.50.)
| Markup percentage | % | ||
| Target selling price | $ |
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