Martin Company is considering the introduction of a new product. To determine a

Question

Martin Company is considering the introduction of a new product. To determine a selling price, the company has gathered the following information: Number of units to be produced and sold each year Unit product cost Projected annual selling and administrative expenses Estimated investment required by the company Desired return on investment (ROI) 15,500 S25 S 64,000 $ 450,000 21% The company uses the absorption costing approach to cost-plus pricing. Required: 1. Compute the markup required to achieve the desired ROI. (Round your Required ROI answers to the nearest whole percentage (I.e, 0.1234s Markup Percentage" answers to 2 decimal places (i.e., 0.1234 should be entered as 12.34.)) Required ROI Investment Selling and administrative expenses Total production cost Unit product cost per unit Unit sales Total sales Markup percentage S 450,000 64,000 25 15,500 S 387,500 0001%

Explanation / Answer

Cost plus pricing is a cost-based method for deciding the prices of a product. Under this methos , we add together the direct material cost, direct laborcost, and overhead costs for a product, and add to the required markup (to create a profit margin) in order to derive the price of the product

Remarks Required ROI 21% As given Investment $450,000 As given Selling and Distribution Expenses $64,000 As given Total Product Cost $451,500 Working 1 Unit Sales $35.23 Working 1 Total Sales $546,000 Working 1 Markup % 20.93% (Total Sales / Total Product Cost - 1)

Related Questions

Navigate

• Browse (All)
• Browse M
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.