Harrington Corporation needs to set a target price for its newly designed product R2-D2. The following data relate to this new product.
|
|
Per Unit
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Total
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|
Direct materials
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$ 8
|
|
|
Direct labor
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$14
|
|
|
Variable manufacturing overhead
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$ 7
|
|
|
Fixed manufacturing overhead
|
|
$2,000,000
|
|
Variable selling and administrative expenses
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$ 6
|
|
|
Fixed selling and administrative expenses
|
|
$1,200,000
|
These costs are based on a budgeted volume of 100,000 units produced and sold each year. Harrington uses cost-plus pricing methods to set its target selling price. The markup on total unit cost is 30%.
Instructions
(a) Compute the total variable cost per unit, total fixed cost per unit, and total cost per unit for R2-D2.
(b) Compute the desired ROI per unit for R2-D2.
(c) Compute the target selling price for R2-D2.
(d) Compute variable cost per unit, fixed cost per unit, and total cost per unit assuming that 80,000 R2-D2s are sold during the year.