Gibbs Corporation produces industrial robots for high-precision manufacturing. T

ID: 2479948 • Letter: G

Question

Gibbs Corporation produces industrial robots for high-precision manufacturing. The following information is given for Gibbs Corporation.

Per Unit Total

Direct materials $420

Direct labor $320

Variable manufacturing overhead $ 73

Fixed manufacturing overhead $1,814,800

Variable selling and administrative expenses $ 60

Fixed selling and administrative expenses $ 561,890

The company has a desired ROI of 21%. It has invested assets of $61,424,000. It anticipates production of 3,490 units per year.

Compute the target selling price.

Target selling price $_________________________

Here total variable cost per unit = $420+$320+$73+$60 = $ 873

Total variable cost for 3490 units = 873*3490= $ 3046770

Total fixed cost = $1814800+$ 561890 = $ 2376690

TOTAL COST = $ 3046770+ $ 2376690 = $ 5423460

DESIRED PROFIT = 61424000*21%= $ 12899040

TARGET SELLING PRICE = TOTAL COST + DESIRED PROFIT

TARGET SELLING PRICE = $5423460+$ 12899040

= $ 18322500

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