Case Study: Strategic pricing of new product

ABC Limited is developing a new clothes dryer, Dry Master, that it plans to sell to coin operated laundries. Currently, the market leader is a product called Dry Well, which is sold by a competitor. The management accountant of the company is doing a market research to determine appropriate selling price for the new clothes dryer.

The management accountant gathered the following information regarding the cost of developing 400 new cloth dryer.

Variable Costs:

Manufacturing $194,000

Sales Commission $20,000

Total Variable Cost $214,000

Fixed Cost Allocated

Manufacturing $130,000

Total Fixed Cost $130,000

Total Cost $344,000

Management decided that the required markup is 30%.

Required:

Calculate the selling price if the company decides to use absorption cost.

Calculate the selling price if the company decides to price total variable cost.