A). Martin Company uses the absorption costing approach to cost-plus pricing. It is considering the introduction of a new product. To determine a selling price, the company has gathered the following information:

Required:

1. Compute the markup percentage on absorption cost required to achieve the desired ROI.

2. Compute the selling price per unit.

B). Shimada Products Corporation of Japan is anxious to enter the electronic calculator market. Management believes that in order to be competitive in world markets, the price of the electronic calculator that the company is developing cannot exceed $15. Shimadas required rate of return is 12% on all investments. An investment of $11,880,000 would be required to purchase the equipment needed to produce the 396,000 calculators that management believes can be sold each year at the $15 price.

Required:

Compute the target cost of one calculator.

Number of units to be produced and sold each year Unit product cost Estimated annual selling and administrative expenses Estimated investment required by the company Desired return on investment (ROI) 10,000 34 20,400 680,000 12%