P22-1A Nati onal Corporation needs to set a target price for its newly designed

Question

P22-1A Nati onal Corporation needs to set a target price for its newly designed product ts. M14-M16. The following data relate to this new product. Total Per Unit $25 $40 $10 Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead Variable selling and administrative expenses Fixed selling and administrative expenses $1,440,000 s 5 $960,000 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%. Instructions (a) Compute the total variable cost per unit, total fixed cost per unit, and total cost per $80 unit for M14-M16. (b) Compute the desired ROI per unit for M14-M16. (c) Compute the target selling price for M14-M16. (d) Compute variable cost per unit, fixed cost per unit, and total cost per unit assuming that 60,000 M14-M16s are produced and sold during the year

Explanation / Answer

(a)

(i) Total variable cost per unit:-

(ii) Total fixed cost per unit:-

(iii) Total cost per unit:-

(b) Desired ROI:-

(c) Target selling price:-

(d)

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Particulars Amount Direct materials 25 Direct labor 40 Variable manufacturing overhead 10 Variable s&a overhead 5 Total variable cost per unit 80

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