Cleanmore Products, Inc. is in the process of setting a selling price on its new top-of-the-line, 3-horsepower, 16-gallon, variable-speed wet/dry shop vacuum. The per unit variable cost estimates for the new shop vacuum are as follows.
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Per Unit
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Direct Materials
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$23
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Direct Labor
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17
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Variable manufacturing overhead
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12
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Fixed manufacturing overhead
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8
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In addition, Cleanmore has the following fixed costs per unit at a budgeted sales volume of 10,000 units.
Cleanmore has decided to price its new shop vacuum to earn a 20% return on its investment (ROI) of $1,000,000.
Compute the markup percentage to achieve a desired ROI of $20 per unit:
Compute the target selling price