Reference no: EM132585152

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 46,000 units.

Per Unit                                                                            Total

Direct materials                                                 $50

Direct labor                                                       $23

Variable manufacturing overhead                            $25

Fixed manufacturing overhead                          $598,000

Variable selling and administrative expenses              $18

Fixed selling and administrative expenses            $414,000

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 23% return on investment (ROI) on invested assets of $1,000,000.

(a) New attempt is in progress. Some of the new entries may impact the last attempt grading.

Question 1: Compute the markup percentage and target selling price that will allow Lovell Computer Parts to earn its desired ROI of 23% on this new component. (Round markup percentage to 2 decimal places, e.g. 10.50%.)