Reference no: EM133137244

Question - Alma's Recording Studio rents studio time to musicians in 2-hour blocks. Each session includes the use of the studio facilities, a digital recording of the performance, and a professional music producer/mixer. Anticipated annual volume is $1000 sessions. The company has invested $2,352,000 in the studio and expects a return on investment (ROI) of 20%. Budgeted costs for the coming year are as follows:

Direct materials: $20 per session

Direct labor $400

Variable overhead $50

Fixed overhead (total) $950,000

Variable selling and administrative expenses $40

Fixed selling and administrative expenses $500,000

Required -

a) Determine the total cost per session;

b) Determine the desired ROI per session;

c) Calculate the markup percentage on the total cost per session;

d) Calculate the target price per session.