Reference no: EM13888815

Harrington Corporation needs to set a target price for its newly designed product R2-D2. The following data relate to this new product.

	Per Unit	Total
Direct materials	$  8
Direct labor	$14
Variable manufacturing overhead	$  7
Fixed manufacturing overhead		$2,000,000
Variable selling and administrative expenses	$  6
Fixed selling and administrative expenses		$1,200,000

These costs are based on a budgeted volume of 100,000 units produced and sold each year. Harrington uses cost-plus pricing methods to set its target selling price. The markup on total unit cost is 30%.

Instructions

(a) Compute the total variable cost per unit, total fixed cost per unit, and total cost per unit for R2-D2.

(b) Compute the desired ROI per unit for R2-D2.

(c) Compute the target selling price for R2-D2.

(d) Compute variable cost per unit, fixed cost per unit, and total cost per unit assuming that 80,000 R2-D2s are sold during the year.