Hansen Corporation needs to set a target price for its newly designed product EverReady. The following data relate to this new product.
Per Unit Total
Direct materials $16.00
Direct labor $41.00
Variable manufacturing overhead $13.00
Fixed manufacturing overhead $1,265,600
Variable selling and administrative expenses $4.00
Fixed selling and administrative expenses $1,208,648
The costs shown above are based on a budgeted volume of 79,100 units produced and sold each year. Hansen uses cost-plus pricing methods to set its target selling price. Because some managers prefer absorption-cost pricing and others prefer variable-cost pricing, the department provides information under both approaches using a markup of 45% on absorption cost and a markup of 68.51% on variable cost.