eu Pront Bven)- Target Cost Why is the profit (dollars and percentage) likely to

Question

eu Pront Bven)- Target Cost Why is the profit (dollars and percentage) likely to be lower using Target Pricing than using other pricing methods? 7) Newbie Co. makes Office Desks. It anticipates selling 30000 of them this year with the following cost structure. Per Unit Total Direct Materials Direct Labor Variable Mfg, OH Fixed Mfg OH Variable Admin/Selling Fixed Admin/Selling 17 8 300000 150000 a) What is the total cost per unit? b) what is the total selling price per unit if Newbie uses a 40% markup? c) What is the total selling price per unit if Newbie has invested 280000 and requires an ROI of 20% ? 8) Using Time and Material pricing, What is the charge for a 4 hour job using the following data Total labor charge per hour Labor profit margin per hour Costs of Parts and Material Material Loading Charge 22.50 10.00 50.00 40%

Explanation / Answer

Anwer 7-a. Variable Cost: Direct Material                  17.00 Direcr Labor                     8.00 Variable Mfg. OH                  11.00         36.00 Fixed Mfb. OH - $300,000 / 30,000 Units         10.00 Total Cost per Unit         46.00 Anwer 7-b. Total Cost per Unit                  46.00 Markup - 40% X $46                  21.16 SP per Unit                  67.16 Anwer 7-c. ROI 20% Net Operating Income - $280,000 X 20%          56,000.00 Selling & Admin. Expenses: Variable - $4 X 30,000        120,000.00 Fixed        150,000.00 Cost of Goods Sold - $46 X 30,000    1,380,000.00 Total    1,706,000.00 No. of Units Sold          30,000.00 SP per Unit                  56.87

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