Eban Wares is an investment center of a major corporation. The following anticipated data are for the next year of operations:

Per unit Total

Direct materials $14

Direct labor $22

Variable manufacturing overhead 30

Fixed manufacturing overhead $4,500,000

Variable selling and administrative expenses $20

Fixed selling and administrative expenses 2,500,000

The anticipated production and sales volume 800,000 units

The company wants to earn 40% return on its unit product cost.

1. Compute the total cost per unit. (5 marks)

2. Compute the target selling price. (5 marks)

3.The corporations minimum required rate of return on investment is 16% and the average operating assets of this division is $40,000,000. Assuming Eban Wares actual production and sales volume was 10,000 units less than budgeted volume.

a. Compute return on investment (5 marks).

b. Compute residual income (5 marks).