Rowan is currently considering establishing a selling price

Reference no: EM13591369

Rowan Company recently began production of a new product, C, which required the investment of $500,000 in assets. Product C is produced in batch sizes of 100 units. Each batch requires 50 machine hours. A total capacity of 12,500 machine hours is available. During this current Rowan expects to sell all the units it can produce and the costs were structured accordingly:

Variable costs per unit
Direct materials $5.00
Direct labor 3.25
Factory overhead 1.75
Selling and administrative expenses 2.00

Fixed costs
Factory overhead $70,000
Selling and administrative expenses 30,000

Requirement 1

Rowan is currently considering establishing a selling price for Product C. the president of Rowan has decided to use the product cost-plus approach to product pricing and has indicated that product C must earn a 16% rate of return on invested assets.

a) Determine the selling price of Product C.
b) Comment on any additional considerations that could influence the establishment of the selling price for Product C.

Reference no: EM13591369

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