thanks! Coldplay Corporation needs to set a target price for its newly designed
ID: 2381870 • Letter: T
Question
thanks!
Coldplay Corporation needs to set a target price for its newly designed product MX1. The fottowmg data relate to this new product. These costs are based on a budgeted volume of units produced and sold each year. Dewitt us cost-plus pricing methods to set its target selling price. The markup on total unit Compute the total variable cost per unit for MX1. Compute the total fixed cost per unit for MX1. Compute the total cost per unit for MX1. Compute the desired ROI per unit for MX1. Compute the target selling price for MX1. Compute variable cost per unit, fixed cost per unit, and total cost per unit 60,000 MX1s are sold during the year. (Round to two decimal places.)Explanation / Answer
A]TOTAL VARIABLE COST = DIRECT MATERIALS P.U.+DIRECT LABOR P.U. + VARIABLE MANUFACTURING OVERHEAD P.U. + VARIABLE SELLING& ADMINISTATIVE EXPENSE P.U
=20+40+10+5
=75 P.U.
A2]TOAL FIXED COST = FIXED MANUFACTURING OVERHEAD + FIXED SELLING& ADMINISTATIVE EXPENSE
=1440000+960000
=2400000
TOTAL COST P.U. = TOTAL VARIABLE COST + [TOTAL FIXED COST/80000]
= 75 +[2400000/80000]
75 + 30
= 105 P.U
B]DESIRED ROI = 30%
COMPANY'S MARK-UP PERCENTAGE IS 30%.IT INDICATES THAT THE COMPANY WANTS A RETURN OS PROFIR OF 30% ON ITS COST. THIS CLEARY SIGNIFIES THAT THE COMPANY;S RETURN ON INVESTMENT IS 30%.THE COMPANY WANTS A RETURN OF 30% ON ITS INVESTMENTS.
C]TARGET SELLING PRICE = TOTAL COST P.U. + TOTAL COST P.U.*(30%)
=TOTAL COST P.U.(1+30%)
= 105*(1.3)
=136.5 P.U.
D]GIVEN:- 60000 UNITS ARE SOLD DURING THE YEAR.VARIABLE COST WILL REMAIN SAME IRRESPECTIVE OF THE UNITS
THEREFORE,VARIABLE COST P.U. [60000 UNITS] = 75 P.U.
FIXED COST P.U. = FIXED COST/NO OF UNITS SOLD DURING THE YEAR
= 2400000/60000
=40 P.U.
TOTAL COST P.U.= VARIABLE COST P.U. FIXED COST P.U.
= 75+40
=115 P.U.
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