Joey's Recording Studio rents studio time to musicians in 2-hour blocks. Each session includes the use of the studio facilities, a digital recording of the performance, and a professional music producer/mixer. Anticipated annual volume is 1,000 sessions. The company has invested $2,000,000 in the studio and expects a return on investment (ROI) of 16.5%. Budgeted costs for the coming year are as follows.

Per Session Total

Direct materials (tapes, CDs, etc) $60

Direct labor $400

Variable overhead $50

Fixed overhead $850,000

Variable selling and administrative expenses $40

Fixed selling and administrative expenses

$800,000

Instructions

(a) Determine the total cost per session.

(b) Determine the desired ROI per session.

(c) Calculate the mark-up percentage on the total cost per session.

(d) Calculate the target price per session.