2/3 attempts used, please give correct answer and work! Problem 22-2A (Part Leve
ID: 2432682 • Letter: 2
Question
2/3 attempts used, please give correct answer and work!
Problem 22-2A (Part Level Submission) 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 47,000 units. Per Unit $ 47 $ 21 $ 18 Total Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead Variable selling and administrative expenses$15 Fixed selling and administrative expenses $611,000 $ 235,000 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 24 % return on investment (ROI) on invested assets of $ 1,263,900 Your answer is partially correct. Try again. Compute the markup percentage and target selling price that will allow Lovell Computer Parts to earn its desired ROI of 24 % on this new component. (Round answers to 2 decimal places, eg, 10.50.) Markup percentage Target selling price1S 119 Attempts: 2 of 3 used The parts of this question must be completed in order. This part will be available when you complete the part above.Explanation / Answer
Answer:
Fixed Manufacturing Overhead per Unit = 611,000 / 47,000
Fixed Manufacturing Overhead per Unit = $13
Fixed Selling and Administrative Expenses per Unit = 235,000 / 47,000
Fixed Selling and Administrative Expenses per Unit = $5
Total Fixed Cost per Unit = $13 + $5
Total Fixed Cost per Unit = $18
Desired ROI = $1,263,900 * 24%
Desired ROI = $303,336
Desired ROI per Unit = 303,336 / 47,000
Desired ROI per Unit = $6.45
Computation of Target Selling Price:
Target Selling Price per Unit = Variable Cost per Unit + Fixed Cost per Unit + Desired ROI per Unit
Variable Cost per Unit = $47 + $21 + $18 + $15
Variable Cost per Unit = $101
Target Selling Price per Unit = $101 + $18 + $6.45
Target Selling Price per Unit = $125.45
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