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Cost per session, target price, ROI

Please see the attached file.

Roxy's Recording Studio rents studio time to musicians in 2-hour blocks. Each
session includes the use of the studio facilities, a digitally recorded tape of the performance,
and a professional music producer/mixer. Anticipated annual volume is 1,000 sessions.
The company has invested $2,058,000 in the studio and expects a return on investment
(ROI) of 20%. Budgeted costs for the coming year are as follows.

Per Session Total
Direct materials (tapes, CDs, etc) $ 20
Direct labor 400
Variable overhead 50
Fixed overhead $950,000
Variable selling and administrative expenses 40
Fixed selling and administrative expenses 500,000

(a) Determine the total cost per session.
(b) Determine the desired ROI per session.
(c) Calculate the mark-up percentage on the total cost per session.
(d) Calculate the target price per session.


Solution Preview

a) Total Cost per session:
Total variable cost per session= $510
Total fixed cost per session= $950,000+ ...

Solution Summary

Cost per session, target price, ROI.