LUS Preblem Lovell Computer Parts Inc. is in the process of setting a seling pri
ID: 2554962 • Letter: L
Question
LUS Preblem Lovell Computer Parts Inc. is in the process of setting a seling price on a w component t has tdsined and developed. The oing cost estimates for tis new component have been provid -2A (Part levwl by th voluma of so,000 Direct iabor elling and ndmimistrative Levell Computer Parts management requests that the total cnet per unit be uned in costplus pricing iRs prducts. On is paticuar product, management also directs that the aget pnce be set t Compute the arget seling price t his new component. (Reand markuo percentage to 2 declmat arget seling price Click if you would like to Show Work fer this questioni Open Shom Werk Attempts of 2 The parts of this qeiom must be medirs part wll be available whe you c to 8 0
Explanation / Answer
MARK UP PERCENTAGE = 2.98%
TARGET SELLING PRICE = $ 138 per unit
CALCULATIONS
Variables Cost per unit
Per Unit($)
Direct materials 46
Direct labor 29
Variable manufacturing overhead 20
Variable selling and administrative expenses 18
Variable cost per unit $ 113
Fixed cost per unit (50,000 units)
Total Costs / Volume = Cost/unit
Fixed manufacturing overhead $600,000 50,000 $12
Fixed S&D 450,000 50,000 9
Fixed cost $10,50,000 $21
Computation of desired ROI (50,000 units)
Desired ROI = $ 10,00,000 * 0.20 = 200000
Desired ROI per unit = $ 200,000 / 50,000 = $4
Computation of selling price (50,000 units)
Variable cost per unit $113
Fixed cost per unit 21
Total unit cost $134
Desired ROI per unit 4
Selling price $138
The mark-up percentage
= Desired ROI per unit / Total unit cost
= 4/134 *100
= 2.98 %
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