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LUS Preblem Lovell Computer Parts Inc. is in the process of setting a seling pri

ID: 2554962 • Letter: L

Question


LUS Preblem Lovell Computer Parts Inc. is in the process of setting a seling price on a w component t has tdsined and developed. The oing cost estimates for tis new component have been provid -2A (Part levwl by th voluma of so,000 Direct iabor elling and ndmimistrative Levell Computer Parts management requests that the total cnet per unit be uned in costplus pricing iRs prducts. On is paticuar product, management also directs that the aget pnce be set t Compute the arget seling price t his new component. (Reand markuo percentage to 2 declmat arget seling price Click if you would like to Show Work fer this questioni Open Shom Werk Attempts of 2 The parts of this qeiom must be medirs part wll be available whe you c to 8 0

Explanation / Answer

MARK UP PERCENTAGE = 2.98%

TARGET SELLING PRICE = $ 138 per unit

CALCULATIONS

Variables Cost per unit

                                                                       Per Unit($)

Direct materials                                                    46

Direct labor                                                          29

Variable manufacturing overhead                        20

Variable selling and administrative expenses 18

Variable cost per unit $ 113

Fixed cost per unit (50,000 units)

Total Costs /         Volume       =       Cost/unit

Fixed manufacturing overhead          $600,000              50,000                  $12

Fixed S&D 450,000                50,000                  9

Fixed cost $10,50,000 $21

Computation of desired ROI (50,000 units)

Desired ROI = $ 10,00,000 * 0.20 = 200000

Desired ROI per unit = $ 200,000 / 50,000 = $4

Computation of selling price (50,000 units)

Variable cost per unit              $113

Fixed cost per unit 21

Total unit cost                         $134

Desired ROI per unit               4

Selling price $138

The mark-up percentage

= Desired ROI per unit / Total unit cost

= 4/134 *100

= 2.98 %

ALL THE BEST