Schopp Corporation makes a mechanical stuffed alligator that sings the Martian n
ID: 2555846 • Letter: S
Question
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 501,000 units.
The company has a desired ROI of 27 %. It has invested assets of $ 28,985,000
Compute the total cost per unit. (Round answer to 2 decimal places, e.g. 10.50.)
Compute the desired ROI per unit. (Round answer to 2 decimal places, e.g. 10.50.)
Compute the markup percentage using total cost per unit. (Round answer to 2 decimal places, e.g. 10.50.)
Compute the target selling price. (Round answer to 2 decimal places, e.g. 10.50.)
Per Unit Total Direct materials $ 6.89 Direct labor $ 10.96 Variable manufacturing overhead $ 15.20 Fixed manufacturing overhead $ 3,466,920 Variable selling and administrative expenses $ 13.92 Fixed selling and administrative expenses $ 1,272,540Explanation / Answer
Fixed manufacturing overhead = 3,466,920
Fixed manufacturing overhead cost per unit = 3,466,920 / 501,000 = 6.92
Fixed selling and administrative expenses = 1,272,540
Fixed selling and administrative expenses per unit = 1,272,540 / 501,000 = 2.54
Total cost per unit = Direct material cost per unit + Direct labour cost per unit + Variable manufacturing overhead cost per unit + Fixed manufacturing overhad cost per unit + Variable selling and administative expenses + Fixed selling and administraive expenses
= 6.89 + 10.96 + 15.2 + 6.92 + 13.92 + 2.54
= 56.43
Total cost per unit = 56.43
Desired ROI = 27%
Desired Net income = 28,985,000 * 27% = 7,825,950
Desired ROI per unit = 7,825,950 / 501,000 = 15.62
Desired ROI per unit = 15.62
Markup percentage using total cost per unit = Desired ROI per unit / total cost per unit
= 15.62 / 56.43
= 27.68%
Markup percentage using total cost per unit = 27.68%
Target Selling price = Cost per unit + Markup on total cost
= 56.43 + (56.43*27.68%)
= 72.05
Target Selling price = 72.05
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