Gigabyte Inc. manufactures three products for the computer industry: Gismos (product G): annual sales, 8,000 units Thingamajigs (product T): annual sales, 15,000 units Whatchamacallits (product W): annual sales, 4,000 units The company uses a traditional, volume-based product-costing system with manufacturing overhead applied on the basis of direct-labor dollars. The product costs have been computed as follows: Raw material Product G $35.00 Product T $ 52.50 Direct labor Manufacturing overhead*. Total product cost. 16.00 (.8 hr. @ $20) 140.00 $191.00 Product W $17.50 -=- 12.00 (.6 hr. @ $20) 105.00 $169.50 8.00 (.4 hr. @ $20) 70.00 $95.50 *Calculation of predetermined overhead rate: Manufacturing overhead budget: Machine setup Machinery Inspection Material handling Engineering Total Direct-labor budget (based on budgeted annual sales): Product G: 8,000 x $16.00 = $128,000 Product T: 15,000 x $12.00 = 180,000 Product W: 4,000 x $8.00 32,000 Total $340,000 Predetermined overhead rate = Budgeted overhead Budgeted direct labor = 875% page 227 $ 5,250 1,225,000 525,000 875,000 344,750 $2,975,000 Gigabyte's pricing method has been to set a target price equal to 150 percent of full product cost. However, only the Thingamajigs have been selling at their target price. The target and actual current prices for all three products are the following: