Problem 22-2A (Part Level Submission) Lovell Computer Parts Inc. is in the proce
ID: 2565024 • Letter: P
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 Total Direct materials $ 49 Direct labor $ 22 Variable manufacturing overhead $ 23 Fixed manufacturing overhead $ 588,000 Variable selling and administrative expenses $ 22 Fixed selling and administrative expenses $ 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 . Collapse question part (a) Partially correct answer. Your answer is partially correct. 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 Entry field with correct answer 3.78 % Target selling price $ Entry field with incorrect answer 142.15 LINK TO TEXT Attempts: 1 of 3 used SAVE FOR LATER SUBMIT ANSWER Expand question part (b) The parts of this question must be completed in order. This part will be available when you complete the part above.
Explanation / Answer
Fixed cost :588000+441000= 1029000
Fixed cost per unit :1029000/49000=21
Target profit :1269000*.20= 253800
Target profit per unit = 253800/49000 =5.18
Selling price =Variable cost+fixed costper unit+Target profit per unit
= 116+21+5.18
= $ 142.18 per unit
Direct material 49 Direct labor 22 Variable manufacturing overhead 23 Variable selling and administrative expenses 22 Total variable cost 116Related Questions
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