Gibbs Corporation produces industrial robots for high-precision manufacturing. T

Question

Gibbs Corporation produces industrial robots for high-precision manufacturing. The following information is given for Gibbs Corporation. Per Unit $440 $350 $ 77 Total Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead Variable selling and administrative expenses Fixed selling and administrative expenses $1,508,000 56 $ 551,000 The company has a desired ROI of 23%. It has invested assets of $53,900,000. It anticipates production of 2,900 units per year (a) Your answer is correct Compute the cost per unit of the fixed manufacturing overhead and the fixed selling and administrative expenses Fixed manufacturing overhead Fixed selling and administrative expenses 520 per unit 190 per unit SHOW SOLUTION SHOW ANSWER LINK TO TEXT (b) Your answer is correct. Compute the desired ROI per unit. (Round answer to 0 decimal places, e.g. 125.) Desired ROI 4275 per unit

Explanation / Answer

C. Compute the markup percentage and target selling price using absorption-cost pricing

Markup percentage on absorption cost = [( return on investment × Investment) + S&A expenses] / Units sales × Unit product cost

=[(23% x 53,900,000) + ($56 x 29,00 + $551,000)] / 29,00 x $1,387

= [$12,397,000 + $713,400] / $4,022,300

= 325.943%

Target Selling Price = Unit Product Cost + Markup percentage of unit product cost

   = $1,387 + (325.943% x $1,387) = $5908

D. Compute the markup percentage and target selling price using variable-cost pricing

Markup Percentage = Desired ROI Per Unit / Unit Product Cost

= $4274.828 / $867 = 493.060%

Target Selling Price per unit = Unit Product Cost + (Unit product cost x Markup percentage)

= $867 + ($867 x 493.060%)

= $5142

Direct Material $440 Direct Labor $350 Variable manufacturing overhead $77 Fixed manufacturing overhead (1,508,000 / 2900) $520 unit product cost $1,387

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