Price Setting: Multiple Products (LO2)

Comtel Electronics Company’s predicted 2012 variable and fixed costs are as follows:

_ Variable Costs — Fixed Costs MERULEGIUMING |:9 4.0.4 crm obs adnan aoe $400,000 $260,000 Selling and administrative .>........ 100,000 50,000 RONG) us. s-ee. ties eet omen cen $500,000 $310,000 Comtel Electronics, Inc., is a small company produces a wide variety of computer interface devices.
Per-unit manufacturing cost information about one of these products, a high-capacity flash drive, is as follows:
Directimatetialstee cs. se anenere $ 8 DineCHlabOl inn ver ane u.cdeunes veneers 7 Manufacturing overhead WET eis Sioteaeneonrercnsbse . 5 Flea cic o ere NEA wre Oc. Bicha pend Total manufacturing costs...... $27 Variable selling and administrative costs for the flash drive is $3 per unit. Management has set a 2012 target profit of $150,000 on the sale of the flash drive.
Required

a. Determine the markup percentage on variable costs required to earn the desired profit.
Use variable cost markup to determine a suggested selling price for the flash drive.

c. For the flash drive, break the markup on variable costs into separate parts for fixed costs and profit. Explain the significance of each part.

d. Determine the markup percentage on manufacturing costs required to earn the desired profit.

e. Use the manufacturing costs markup to determine a suggested selling price for the flash drive.

f. Evaluate the variable and the manufacturing cost approaches to determine the markup percentage. LO.1