Fast Buck Corporation needs to set a target price for its newly designed product EverRun. The following data relate to this new product:

The costs above are based on a budgeted volume of 80,000 units produced and sold each year. Fast Buck uses cost-plus pricing to set its target selling price. Because some managers prefer the absorption-cost approach and others prefer the variable-cost approach, the accounting department provides information under both approaches, using a markup of 50% on the manufacturing cost per unit and a markup of 75% on the variable cost.
Instructions
(a) Calculate the target price for one unit of EverRun using the absorption-cost approach.
(b) Calculate the target price for one unit of EverRun using the variable-cost approach.

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Per Unit $20 40 10 Total Direct materials Direct labour Variable manufacturing overhead Fixed manufacturing overhead Variable selling and administrative expenses Fixed selling and administrative expenses $1,400,000 1,120,000