Martn Company is consiccnng the introduction of a now product. To dcterminc a sc

Question

Martn Company is consiccnng the introduction of a now product. To dcterminc a scling pnice, the company has gathcrod the tollowing infonmation: Number of units to be produced and sald cach year Unit product cos Proiected "nual seling and ddministrativs expenses Estimabed invastment required by the company besinad ranum on investmant (FM) 15 500 S 64000 320000 The company uses the abcorption costng approach to cost-plus pricing pultt thee mar kupe unnd I achieve ltte desllet RDI Round your Required Rol answers to th n@arost whola Percar tage 1.0 0.1 234 should be onterad as 1 2 . Round your narkuP Peron age answers to 2 decimal places e 0.1234 should be @nterad 12. Required ROI 20 % Saling and admnistatwe axpansee alproduction coat Unit praduct cost per unit Unit sales Markup parcantaga 2 Compute the scling pricc per unit Round your intermediate and final answers to 2 decimal places. Unit praduct coat Markup Selina price per uni D0D

Explanation / Answer

1. Compute Market Requirements to achieve Desired ROI Required ROI 18% Investment 3,20,000 Selling & Administrtive Expenses 64000 Total production costs (15500*40) 620000 Total Cost of Sales 684000 Unit cost per Unit (684000/15500) 44.13 Required profit (320,000*0.18) 57600 Unit Sales 15500 Total Sales $741600 Markup Persentage 8.42% Profit required =320,000*0.18 =$57600 Total Sales = Required profit + Production Cost + Selling & Distribution Cost =$57600+620000+64000=$741600 Mark up persentage = (Sales - Total Cost ) /Cost of Sales   *100 = ($741600-$684,000) /684000   *100 =57600/684000    *100 =8.42% 2 Compute the Selling Price Per Unit Amount in $ Unit Production Cost 44.13 markup (44.13*8.42%) 3.72 Selling Price Per Unit 47.85

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