Problem
I. Culver Cheese Company has developed a new cheese slicer called Slim Slicer. The company plans to sell this slicer through its catalog which is issued monthly. Given market research, Culver believes that it can charge $15 for the Slim Slicer. Prototypes of the Slim Slicer, however, are costing $22. By using cheaper materials and gaining efficiencies in mass production Culver believes it can reduce Slim Slicer's cost substantially. Culver wishes to earn a return of 30% of the selling price. Compute the target cost for the Slim Slicer.
II. Marlowe Corporation makes a mechanical stuffed alligator that sings the Martian national anthem. The following information is available for Marlowe Corporation's anticipated annual volume of 500,000 units
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Per Unit
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Total
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Direct materials
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$7
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Direct labor
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$9
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Variable manufacturing overhead
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$15
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Fixed manufacturing overhead
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$3,300,000
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Variable selling and admin expenses
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$14
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Fixed selling and admin expenses
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$1,500,000
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i. Compute Total Cost per Unit
ii. Compute Desired ROI Per Unit
iii. Compute Markup percentage Based On total Cost per Unit
iv. Compute Target Selling Price.