Dan's Doors is in the process of setting a target price on its newly designed patio door. Cost data relating to the door at a budgeted volume of 5,000 units is as follows:

Per Unit Total

Direct materials $250

Direct labour 170

Variable manufacturing overhead 80

Fixed manufacturing overhead $500,000

Variable selling and administrative expenses 25

Fixed selling and administrative expenses 375,000

Dan's uses cost-plus pricing that provides it with a 25% ROI on its patio door line. A total of $4,000,000 in assets is committed to production of the new door.

Instructions

a) Calculate each of the following under the absorption approach:

i. Markup percentage needed to provide desired ROI.

ii. Target price of the patio door.

b) Calculate each of the following under the variable cost-plus approach:

i. Markup percentage needed to provide desired ROI.

ii. Target price of the patio door.

SHOW WORK PLEASE.