E-books Company is planning the introduction of a new product. The following information relating to the product has been assembled:

Variable Costs (per unit):

Materials, Labour, and Overhead

$15

Selling and Administrative

$3

Fixed Costs per Year:

Manufacturing Overhead

$375,000

Selling and Administrative

$300,000

Investment Required

$750,000

Required Rate of Return

20%

Total Units to Be Produced and Sold Each Year

75,000

The company uses the absorption costing approach to pricing.

Required:

a)Determine the product cost.

b)What would be the markup percentage needed on the new product?

c)Compute the target selling price for one unit of the new product using the absorption costing approach.