2. Schopp Corporation makes a mechanical stuffed alligator that sings the Martia

Question

2. Schopp Corporation makes a mechanical stuffed alligator that sings the Martian national anthem. The following information is available for Schopp Corporation's anticipated volume of 500,000 units. Per unit costs: Direct materials Direct labor Variable overhead Variable selling and administrative $11 $15 $14 Total fixed costs: Fixed overhead Fixed selling and administrative 3,000,000 $1,500,000 The company has a desired ROI of 25%. It has invested assets of $28,000,000. Instructions (a) Compute the total cost per unit. (b) Compute the desired ROI per unit. (c) Compute the markup percentage using total cost per unit. (d) Compute the target selling price.

Explanation / Answer

a Total cost per unit: Direct materials 7 Direct labor 11 Variable overhead 15 Variable selling and administrative expense 14 Fixed overhead 6 =3000000/500000 Fixed selling and administrative expense 3 =1500000/500000 Total cost per unit 56 b Desired ROI per unit=(28000000*25%)/500000= 14 c Markup percentage = 14/56= 25% d target selling price=56+14 = $70

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