Problem 22-2A (Part Level Submission) Lovell Computer Parts Inc. is in the proce

Question

Problem 22-2A (Part Level Submission) Lovell Computer Parts Inc. is in the process of setting a selling price on a new component it has just designed and developed. The following cost estimates for this new component have been provided by the accounting department for a budgeted volume of 49,000 units. Per Unit $ 49 $ 22 23 Total Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead Variable selling and administrative expenses 22 Fixed selling and administrative expenses $588,000 $441,000 Lovell Computer Parts management requests that the total cost per unit be used in cost-plus pricing its products. On this particular product, management also directs that the target price be set to provide a 20 % return on investment (ROI) on invested assets of $ 1,269,000 Your answer is incorrect. Try again Compute the markup percentage and target selling price that will allow Lovell Computer Parts to earn its desired ROI of 20 % on this new component. (Round answers to 2 decimal places, e.g. 10.50.) Markup percentage Target selling price LINK TO TEXT VIDEO: SIMILAR PROBLEM

Explanation / Answer

Desired ROI per unit = (1269000*20%)/49000= $5.18 Fixed cost per unit=(588000+441000)/49000= $21 Total cost per unit = 49+22+23+22+21= $137 a Markup percentage = 5.18/137= 3.78% Target selling price = 137+5.18= $142.18

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