Question
Coronado, Inc. produces a number of components that are used in home theater systems. Fred Briggs, head of the company's market research department, has
Coronado, Inc. produces a number of components that are used in home theater systems. Fred Briggs, head of the company's market research department, has identified the need for a new component that will most likely sell for $88. Projected volume levels are anticipated to reach 29,100 units in the first year, as several firmly entrenched competitors will be introducing a similar product in the not-too-distant future. Conversations with Coronado's engineers and reviews of cost accounting data related to similar products that the company manufactures resulted in the following cost estimates for the new component: Direct materials Direct labour $20 34 Manufacturing overhead 26 Selling and administrative 8 Coronado currently uses cost-plus pricing and adds a 20% markup on total production cost to arrive at what is normally a competitive selling price. (a) What is the anticipated selling price of the new component if Coronado uses its current pricing policy? Selling price $
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