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Happy Ltd invested $500,000 in the manufacture of a new product and estimated data for the coming year are given below: Units to product &
Happy Ltd invested $500,000 in the manufacture of a new product and estimated data for the coming year are given below:
Units to product & sell: 4000
Variable costs:
Manufacturing - $204,000
Selling and administrative - $14,700
Total - $218,700
Fixed costs:
Manufacturing - $36,000
Selling and administrative - $27,300
Total - $63,300
The company uses a cost-plus approach for product pricing and desires a rate of return of 21 percent per year on the amount invested. A similar product in the market is selling for $88 per unit.
Required:
a] determine the desired profit per year
b] determine the mark up percentage and selling price per unit of the new product using
i] variable cost concept
ii] product cost concept
Round your answers to 2 decimal places.
c] determine the selling price of the new product per unit and the total amount of cost reduction required per year if target costing is used.
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