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

Question

Stent Corporation needs to set a target price for its newly designed product EverReady. The following data relate to this new product. The costs shown above are based on a budgeted volume of 78,800 units produced and sold each year. Stent uses cost-plus pricing methods to set its target selling price. Because some managers prefer absorption-cost pricing and others prefer variable-cost pricing, the accounting department provides information under both approaches using a markup of 48% on absorption cost and a markup of 74.27% on variable cost. Compute the target price for one unit of EverReady using absorption-cost pricing. (Round answer to 2 decimal places, e.g. 10.50.) By accessing this Question Assistance, you will learn while you earn points based on the Point Potential Policy set by your instructor. The parts of this question must be completed in order. This part will be available when you complete the part above.

Explanation / Answer

Answer:(a) Calculation of the target price using absorption-cost pricing:

Particulars Per unit ($) Direct Material 25 Direct Labor 42 Variable Manufacturing overhead 11 Fixed manufacturing overhead 20.91 1647708/78800 Total cost 98.91 Add: Markup (48%) 47.4768 98.91*48% Target price 146.3868

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