Exercise 22-6

Almas Recording Studio rents studio time to musicians in 2-hour blocks. Each session includes the use of the studio facilities, a digital recording of the performance, and a professional music producer/mixer. Anticipated annual volume is 1,060 sessions. The company has invested $2,339,000 in the studio and expects a return on investment (ROI) of 22%. Budgeted costs for the coming year are as follows.

		Per Session			Total
Direct materials (CDs, etc.)		$ 19.61
Direct labor		$411.00
Variable overhead		$ 54.00
Fixed overhead					$1,004,880
Variable selling and administrative expenses		$ 40.00
Fixed selling and administrative expenses					$526,820

Determine the total cost per session. (Round answer to 2 decimal places, e.g. 10.50.)

Total cost

$

per session

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Determine the desired ROI per session. (Round answer to 2 decimal places, e.g. 10.50.)

ROI

$

per session

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Calculate the markup percentage on the total cost per session. (Round answer to 2 decimal places, e.g. 10.50.)

Markup percentage

%

per session

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Calculate the target price per session. (Round answer to 2 decimal places, e.g. 10.50.)

Target price

$

per session

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