Gerber Clothing Inc. has designed a rain suit for outdoor enthusiasts that is about to be introduced on the market. A standard cost

card has been prepared for the new suit, as follows:

a$.$ The only variable selling and administrative costs will be $$6$ per suit for shipping. Fixed selling and administrative costs will be as

follows $($per year$)$:

b$.$ Since the company manufactures many products, it is felt that no more than $10,500$ hours of labour time per year can be devoted to

production of the new suits.

c$.$ An investment of $$550,000$ will be necessary to carry inventories and accounts receivable and to purchase some new equipment.

The company wants a $20\%$ ROI in new product lines.

d$.$ Manufacturing overhead costs are allocated to products on the basis of direct labour$-$hours.

Required:

Assume that the company uses the absorption approach to cost$-$plus pricing.

a$.$ Compute the markup that the company needs on the rain suits to achieve a $20\%$ROI if it sells all of the suits it can produce using

$10,500$ hours of labour time.

b$.$ Using the markup you have computed, prepare a price quote sheet for a single rain suit. $($Round your answers to $2$ decimal

places.$)$