Lovell Computer Parts Inc. is in the process of setting a selling price on a new component it has just designed and developed. The following cost estimates for this new component have been provided by the accounting department for a budgeted volume of 50,000 units.
Per Unit Total
Direct materials $ 45
Direct labor $ 29
Variable manufacturing overhead $ 20
Fixed manufacturing overhead $ 750,000
Variable selling and administrative expenses $ 13
Fixed selling and administrative expenses $ 400,000
Lovell Computer Parts management requests that the total cost per unit be used in cost-plus pricing its products. On this particular product, management also directs that the target price be set to provide a 26 % return on investment (ROI) on invested assets of $ 1,236,600 .
[Collapse question part]
(a) Compute the markup percentage and target selling price that will allow Lovell Computer Parts to earn its desired ROI of 26 % on this new component. (Round answers to 2 decimal places, e.g. 10.50.)
Markup percentage %
Target selling price $