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Excellence Inc. uses the absorption costing approach to cost-plus pricing to set prices for its products. The company has invested $400,000 in this product and
Excellence Inc. uses the absorption costing approach to cost-plus pricing to set prices for its products. The company has invested $400,000 in this product and expects a return on investment of 9%. Based on a budgeted sale of 34,000 units next year, the budgeted costs are as below: Per Unit Total Direct Materials $27.30 Direct Labor 15.40 Variable Manufacturing Overhead 14.30 Fixed Manufacturing Overhead $163,200 Variable Selling & Administrative Expenses 12.60 Fixed Selling & Administrative Expenses $380,800 Required: a. Calculate the unit product cost. [6 marks] b. Compute the markup required to achieve the desired ROI. [8 marks] C. Compute the target selling price to achieve desired profit. [3 marks]
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