Martin Company is considering the introduction of a new product T determine a se
ID: 2437443 • Letter: M
Question
Martin Company is considering the introduction of a new product T determine a selling price, the company has gathered the fo owing information Number of units to be produced and sold each year Unit product cost Projected annual selling and administrative expenses Estimated investment required by the company Desired return on investment (ROI) 17,000 50 S 52,000 S 540,000 19% The company uses the absorption costing approach to cost-plus pricing Required: 1. Compute the markup required to achieve the desired ROl. (Round your Required ROl answers to the nearest whole percentage (i.e, 0.1234 should b Round your ..Markup Percentage" answers to 2 decimal places (Le-, 0.1234 should be entered as 12.34) Required ROI Investment Selling and administrative expenses Total production cost Unit product cost per unit Unit sales Total sales Markup percentage S 540,000 52 50 17,000 S 850,000Explanation / Answer
(1)
Unit product cost = $50
Selling and administrative expenses = $52,000
Number of units to be produced and sold = 17,000
Hence, total variable cost = 17,000 x 50
= $850,000
Hence, total cost of goods sold = Total variable cost + Selling and administration cost
= 850,000 + 52,000
= $902,000
Investment = $540,000
ROI = 19%
Hence, Returns required = 540,000 x 19%
= $102,600
Hence, mark up % = Mark up/Total cost
= 102,600/902,000
= 11.37%
(2)
Total sales = Total cost + Mark up
= 902,000 + 102,600
= $1,004,600
Selling price per unit = Total sales/Number of units sold
= 1,004,600/17,000
= $59.09
Kindly give a positive rating, if you are satisfied with the answer. Feel free to ask if you have any doubt. Thanks.
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.