Rita Corporation produces commercial fertilizer spreaders. The following informa

Question

Rita Corporation produces commercial fertilizer spreaders. The following information is available for Rita's anticipated annual volume of 400,000 units.

Direct materials per unit = $42

Direct labor per unit = $54

Variable manufacturing overhead per unit = $72

Fixed manufacturing overhead total = $12,000,000

Variable selling and administrative expenses per unit = $84

Fixed selling and administrative expenses total =$7,200,000

The company has a desired ROI of 25%. It has invested assets of $120,000,000.

Instructions:Compute each of the following: 1. Total cost per unit.2. Desired ROI per unit.3. Markup percentage using total cost per unit. 4. Target selling price

Explanation / Answer

Hi,

Please find the answers as follows:

1) Total cost per unit = 42 + 54 + 72 + 12000000/400000 + 84 + 7200000/400000 = $ 300

2) Desired ROI per unit = (120000000*.25)/400000 = $ 75

3) Mark up % = 75/300 = 25%

4) Target Selling Price = 300 + 300*25% = $ 375.

Thanks.

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