Better understanding with attachment (sorry but thank you)
Tree Top Company is in the process of setting a selling price for its newest model stunt kite, thlooper. The controller of Tree Top estimates variable cost per unit for the new model to be as
Direct materials $15.00
Direct labor $12.00
Variable manufacturing overhead $4.00
Variable selling and administrative expenses $5.00
In addition, Tree Top anticipates incurring the following fixed cost per unit at a budgeted sales
volume of 20,000 units:
Total Cost Budget Cost
Cost Volume per unit
Fixed manufacturing overhead $240,000 20,000 $12.00
Fixed selling and administrative expenses $260,000 20,000 $13.00
Fixed cost per unit $25.00
Tree Top uses cost-plus pricing and would like to earn a 12% return on its investment (ROI) of $250,000.
Compute the selling price that would provide Tree Top a 12% ROI.
Solution Template: Unit Price
Variable cost per unit $-
Fixed cost per unit $-
Desired ROI per unit $-
Target Selling price $-
Desired ROI per unit
( * .12% / units = $ . )
This solution helps complete a pricing decision exercise.