Reference no: EM132521730

Wamser Corporation needs to set a target price for its newly designed product, E2-D2. The following data relate to it:

Per Unit                                                            Total

Direct materials                                         $15

Direct labour                                            $25

Variable manufacturing overhead                  $14

Fixed manufacturing overhead                     $4,000,000

Variable selling and administrative expenses   $12

Fixed selling and administrative expenses      $2,000,000

• These costs are based on a budgeted volume of 1 million units produced and sold each year. Wamser uses cost-plus pricing to set its target selling price. The markup on the total unit cost is 25%.

Instructions:

Question (a) Calculate the total variable cost per unit, total fixed cost per unit, and total cost per unit for E2-D2.

Question (b) Calculate the desired ROI per unit for E2-D2.

Question (c) Calculate the target selling price for E2-D2.

Question (d) Calculate the variable cost per unit, fixed cost per unit, and total cost per unit, assuming that 800,000 E2-D2s are produced during the year (Round to two decimal places).