Reference no: EM132526457

Gildersleeve Corporation manufactures a product that has the following costs:

                                                      Per unit                         Per year

Direct Materials                                    $6.00

Direct Labour                                        5.00

Variable manufacturing overhead              4.00

Fixed manufacturing overhead                                              $360,000

Variable SG&A expenses                          5.00

Fixed SG&A expenses                                                           120,000

• The company uses the absorption costing approach to cost-plus pricing. The pricing calculations are based on budgeted production and sales of 30,000 units per year.

• The company has invested $600,000 in this product and expects a return on investment of 15%.

Required:

Question a) Compute the markup on absorption cost.

Question b) Compute the target selling price of the product using the absorption costing approach.