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Compute the markup percentage and target selling price

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Reference no: EM13888826

Robo Parts Inc. is in the process of setting a selling price on a new robotics 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 100,000 units.

Per Unit

Total

Direct materials

$30

Direct labor

$20

Variable manufacturing overhead

$17

Fixed manufacturing overhead

 

$2,500,000

Variable selling and administrative expenses

$8

Fixed selling and administrative expenses

 

500,000

Robo's 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 30% return on investment (ROI) on invested assets of $3,000,000.

Instructions

(Round all calculations to two decimal places.)

(a) Compute the markup percentage and target selling price that will allow Robo to earn its desired ROI of 30% on this new component.

(b) Assuming that the volume is 80,000 units, compute the markup percentage and target selling price that will allow Robo to earn its desired ROI of 30% on this new component.

Reference no: EM13888826

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