Reference no: EM132793238
Problem - Ready Ltd invested $500,000 to manufacture Product P and desires a rate of return of 15% per year on the amount invested.
The following information are given for the production and sale of 5,000 units per year:
$
Direct materials 180,000
Direct labour 120,000
Variable factory overhead 30,000
Variable selling and administrative 20,000
Fixed factory overhead 100,000
Fixed selling and administrative 50,000
The company uses cost-plus pricing method to determine the selling price of this product.
Required - Round off your answers to 2 decimal places if applicable. Show all workings.
a) Determine the desired profit per year.
b) Determine the markup percentage and selling price per unit of Product P using product cost concept.
c) Explain the additional considerations that could influence the establishment of the selling price for Product P.
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