Exercise M-5 The company has a desired ROI of 25%. It has invested assets of $28
ID: 2542565 • Letter: E
Question
Exercise M-5
The company has a desired ROI of 25%. It has invested assets of $28,621,000.
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Exercise M-5
Schopp Corporation makes a mechanical stuffed alligator that sings the Martian national anthem. The following information is available for Schopp Corporation's anticipated annual volume of 508,000 units.Per Unit Total Direct materials $ 7.01 Direct labor $10.95 Variable manufacturing overhead $14.83 Fixed manufacturing overhead $3,561,080 Variable selling and administrative expenses $14.02 Fixed selling and administrative expenses $1,686,560
The company has a desired ROI of 25%. It has invested assets of $28,621,000.
Explanation / Answer
Answer: a. The total cost would be: Direct material $ 3,561,080.00 =7.01*508000 Direct Labour $ 5,562,600.00 =10.95*508000 Variable manufacturing overhead $ 7,533,640.00 =14.83*508000 Fixed manufacturing overhead $ 3,561,080.00 Variable selling and administrative expenses $ 7,122,160.00 =14.02*508000 Fixed selling and administrative expenses $ 1,686,560.00 Total cost $ 29,027,120.00 Total cost per unit =$29,027,120/508,000 $ 57.14 b. The desired ROI per unit: Desired ROI =Net investmnt in asset*25% =28621000*25% $ 7,155,250.00 c. The markup percentage using total cost Markup percentage using total cost per unit =$7,155,250/$29,027,120 24.65% d. The target selling price Target selling price =Total cost per unit*(100+Markup percentage) =$57.14*(100+24.65)% $ 71.23
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