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Compute the markup percentage and target selling price

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Reference no: EM132951830

Question - Lovell Computer Parts Inc. is in the process of 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 45,000 units.

Direct materials $51 Direct labor $30 Variable manufacturing overhead $20 Fixed manufacturing overhead $495,000 Variable selling and administrative expenses $18 Fixed selling and administrative expenses $225,000

Lovell Computer Parts management requests that the total cost per unit be used in cost-plus pricing its products. On this particular product, management also directs that the target price be set to provide a 18% return on investment (ROI) on invested assets of $1,000,000.

Required -

Compute the markup percentage and target selling price that will allow Lovell Computer Parts to earn its desired ROI of 18% on this new component.

Assuming that the volume is 36,000 units, compute the markup percentage and target selling price that will allow Lovell Computer Parts to earn its desired ROI of 18% on this new component.

Reference no: EM132951830

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