Share
Explore BrainMass

Target selling price

Lafluer Corporation needs to set a target price for its newly designed product M14 - M16. The following data relate to this new product.

Per Unit Total
Direct materials $20
Direct labor $42
Variable manufacturing overhead $10
Fixed manufacturing overhead $1,440,000
Variable selling and administrative expenses $5
Fixed selling and administrative expenses $1,040,000

These costs are based on a budgeted volume of 80,000 units produced and sold each year. Lafluer uses cost-plus pricing methods to set its target selling price. The markup percentage on total unit cost is 30%.
Hint:
Use cost-plus pricing to determine various amounts.

Instructions
(a) Compute the total variable cost per unit, total fixed cost per unit, and total cost per unit for M14 - M16.

(b) Compute the desired ROI per unit for M14 - M16.

(c) Compute the target selling price for M14 - M16.

(d) Compute variable cost per unit, fixed cost per unit, and total cost per unit assuming that 60,000 M14 - M16s are sold during the year. (Round to two decimal places.)

Solution Preview

Lafluer Corporation needs to set a target price for its newly designed product M14 - M16. The following data relate to this new product.

Per Unit Total
Direct materials $20
Direct labor $42
Variable manufacturing overhead $10
Fixed manufacturing overhead $1,440,000
Variable selling and administrative expenses $5
Fixed selling and administrative expenses $1,040,000

These costs are based on a budgeted volume of 80,000 units produced and sold each year. Lafluer uses cost-plus pricing ...

Solution Summary

Response provides the steps to compute the target selling price

$2.19