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Calculate the markup percentage and target selling price

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Question - Bolus Computer Parts Ltd. is setting a selling price on a new component it has just designed and developed. The following cost estimates for this new component have been provided by the accounting department for a budgeted volume of 57,500 units:

 

Per Unit

Total

Direct materials 

$51

Direct labour 

25

Variable manufacturing overhead

18

Fixed manufacturing overhead 

$747,500

Variable selling and administrative expenses 

24

Fixed selling and administrative expenses 

517,500

Bolus Computer Parts' management requests that the total cost per unit be used in the cost-plus pricing of products. On this particular product, management also directs that the target price be set to provide a 20% return on investment on invested assets of $1,437,500.

Calculate the markup percentage and target selling price that will allow Bolus Computer Parts to earn its desired ROI of 20% on this new component.

Assuming that the volume is 46,000 units, calculate the markup percentage and target selling price that will allow Bolus Computer Parts to earn its desired ROI of 20% on this new component.

Reference no: EM133117154

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