Problem 8-1A National Corporation needs to set a target price for its newly desi
ID: 2455793 • Letter: P
Question
Problem 8-1A
National Corporation needs to set a target price for its newly designed product M14–M16. The following data relate to this new product.
Per Unit
Total
Direct materials
$29
Direct labor
$41
Variable manufacturing overhead
$13
Fixed manufacturing overhead
$1,520,000
Variable selling and administrative expenses
$ 4
Fixed selling and administrative expenses
$ 1,040,000
These costs are based on a budgeted volume of 80,000 units produced and sold each year. National uses cost-plus pricing methods to set its target selling price. The markup percentage on total unit cost is 35%.
Compute the total variable cost per unit, total fixed cost per unit, and total cost per unit for M14–M16.
Variable cost per unit
$
Fixed cost per unit
Total cost per unit
$
Compute the desired ROI per unit for M14–M16. (Round answer to 2 decimal places, e.g. 10.50.)
Desired ROI
$
Compute the target selling price for M14–M16. (Round answer to 2 decimal places, e.g. 10.50.)
Target selling price
$
Compute variable cost per unit, fixed cost per unit, and total cost per unit assuming that 59,200 M14–M16s are produced and sold during the year. (Round answers to 2 decimal places, e.g. 10.50.)
Variable cost per unit
$
Fixed cost per unit
Total cost per unit
$
Problem 8-1A
National Corporation needs to set a target price for its newly designed product M14–M16. The following data relate to this new product.
Per Unit
Total
Direct materials
$29
Direct labor
$41
Variable manufacturing overhead
$13
Fixed manufacturing overhead
$1,520,000
Variable selling and administrative expenses
$ 4
Fixed selling and administrative expenses
$ 1,040,000
These costs are based on a budgeted volume of 80,000 units produced and sold each year. National uses cost-plus pricing methods to set its target selling price. The markup percentage on total unit cost is 35%.
Compute the total variable cost per unit, total fixed cost per unit, and total cost per unit for M14–M16.
Variable cost per unit
$
Fixed cost per unit
Total cost per unit
$
Compute the desired ROI per unit for M14–M16. (Round answer to 2 decimal places, e.g. 10.50.)
Desired ROI
$
Compute the target selling price for M14–M16. (Round answer to 2 decimal places, e.g. 10.50.)
Target selling price
$
Compute variable cost per unit, fixed cost per unit, and total cost per unit assuming that 59,200 M14–M16s are produced and sold during the year. (Round answers to 2 decimal places, e.g. 10.50.)
Variable cost per unit
$
Fixed cost per unit
Total cost per unit
$
Explanation / Answer
Statement showing computations for 80,000 Units Particulars Amount Variable Costs: Direct Materials @29 2,320,000.00 Direct Labour @41 3,280,000.00 Variable Manu O/H @13 1,040,000.00 Variable Selling @4 320,000.00 Total Variable Costs 6,960,000.00 VC per unit(6960,000/80000) 87.00 Fixed Costs: Fixed Manu O.H 1,520,000.00 Fixed selling and admin 1,040,000.00 Total Fixed Costs 2,560,000.00 FC per unit (2560,000/80000) 32.00 TOTAL cost per unit(VC+FC) 119.00 Mark up@35% (119*.35) or Desired ROI per unit 41.65 Target Selling price (119+41.65) 160.65 Statement showing computations for 59,200 Units Particulars Amount Variable Costs: Direct Materials @29 1,716,800.00 Direct Labour @41 2,427,200.00 Variable Manu O/H @13 769,600.00 Variable Selling @4 236,800.00 Total Variable Costs 5,150,400.00 VC per unit(6960,000/59200) 87.00 Fixed Costs: Fixed Manu O.H 1,520,000.00 Fixed selling and admin 1,040,000.00 Total Fixed Costs 2,560,000.00 FC per unit (2560,000/59200) 43.24 TOTAL cost per unit(VC+FC) 130.24