National Corporation needs to set a target price for its newly designed product

Question

National Corporation needs to set a target price for its newly designed product M14–M16. The following data relate to this new product.
These costs are based on a budgeted volume of 80,000 units produced and sold each year. National uses cost-plus pricing methods to set its target selling price. The markup percentage on total unit cost is 40%.

(a) Compute the total variable cost per unit, total fixed cost per unit, and total cost per unit for M14–M16.

Variable cost per unit $
Fixed cost per unit
Total cost per unit $

Per Unit Total Direct materials $25 Direct labor $40 Variable manufacturing overhead $10 Fixed manufacturing overhead $1,440,000 Variable selling and administrative expenses $ 5 Fixed selling and administrative expenses $ 960,000

Explanation / Answer

Variable cost per unit = 25+40+10+5= $80 Fixed cost per unit = (1440000+960000)/80000= $30 Total cost per unit = 80+30 = $110

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