Michigan Company has budgeted the following costs for the production of its only
ID: 2415250 • Letter: M
Question
Michigan Company has budgeted the following costs for the production of its only product:
Direct Materials $35,000
Direct Labor 25,000
Variable indirect production costs 30,000
Fixed indirect production costs 15,000
Variable selling and administrative costs 7,500
Fixed selling and administrative costs 12,500
Total Costs $125,000
Michigan Company has a target profit of $50,000. ________ is the target price. SHOW WORK
Explanation / Answer
The target price is achieved by adding the target profit to the total costs so budgeted:
Cost Items: Amount $
Direct Materials $35,000
Direct Labor 25,000
Variable indirect production costs 30,000
Fixed indirect production costs 15,000
Variable selling and administrative costs 7,500
Fixed selling and administrative costs 12,500
Total Costs $125,000
Add: Profit Margin $50,000
Total Selling Price (target) $175,000