Gildersleeve Corporation manufactures a product that has the following costs:

Per unitPer year

Direct Materials$6.00

Direct Labour 5.00

Variable manufacturing overhead 4.00

Fixed manufacturing overhead$360,000

Variable SG&A expenses 5.00

Fixed SG&A expenses 120,000

The company uses the absorption costing approach to cost-plus pricing. The pricing calculations are based on budgeted production and sales of 30,000 units per year.

The company has invested $600,000 in this product and expects a return on investment of 15%.

Required:

a) Compute the markup on absorption cost.

b) Compute the target selling price of the product using the absorption costing approach.