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mark up percentage and target selling price

A budget of 50,000 units

Per Unit Total
Direct Materials $50.00
Direct Labor $25.00
Variable Manufacturing overhead $20.00
Fixed manufacturing overhead $600,000
Variable selling and admin. Expenses $18.00
Fixed selling and admin expenses $400,000

Bolus Computer parts management request that the total cost per unit be used in a cost plus
Pricing products. On this particular product, management also directs that the target price
Be set to provide a 25% return on investment ROI on invested assets of $1,200,000.00

Instructions

B.

Assuming that the volume is 40,000 units compute the mark up percentage and target
Selling price that will allow bolus computer parts to earn its desired ROI of 25% on this
New component.

Solution Preview

Variable costs per unit:

Direct Materials $50.00
Direct Labor $25.00
Variable Manufacturing overhead $20.00
Variable selling and admin. Expenses $18.00

Total: $113

For 50,000 units:

$ 5650000

Total Fixed costs:

Fixed manufacturing overhead $600,000 ...

Solution Summary

Assuming that the volume is 40,000 units compute the mark up percentage and target
Selling price that will allow bolus computer parts to earn its desired ROI of 25% on this
New component.

$2.19