Frontleg Chocolate Company manufactures and sells a premium chocolate called PremiumChoco. The following

data are available for preparing budgets for PremiumChoco for June through August of 2020.

1. Sales: June , 30,000 pounds; July, 56,000 pounds, August 58,000 pounds.

2. Direct materials: each pound of PremiumChoco requires 5 pounds of cacao seeds at a cost of $2.95 per

pound and 4 pounds of cane sugar at $.50 per pound.

3. Desired inventory levels:

Type of Inventory

May 1

June 1

July 1

August 1

PremiumChoco (pounds)

7,000

8,000

15,000

18,000

cacao seeds (pounds)

6,000

9,000

10,000

13,000

cane sugar (pounds)

5,000

14,000

20,000

25,000

4. Direct labor: direct labor time is 30 minutes per pound at an hourly rate of $20 per hour.

5. Selling and administrative expenses are expected to be .05 cents per unit sold plus $82,000 per month.

6. Your assistant has prepared two budgets: (1) The manufacturing overhead budget shows expected

costs to be 150% of direct labor cost (all variable costs).

7. The company uses a 30% markup percentage on total cost

8. Interest Expense is $150,000.

9. Income taxes are expected to be 21% of income before income taxes.

6	Compute the target selling price.
	Total cost per unit
	Markup
	Target selling price