Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Lovell Computer Parts Inc. is in the process of setting a selling price on a new component it has just designed and developed. The following

Lovell Computer Parts Inc. is in the process of setting a selling price on a new component it has just designed and developed. The following cost estimates for this new component have been provided by the accounting department for a budgeted volume of 46,000 units.

Per Unit Total
Direct materials $50
Direct labor $23
Variable manufacturing overhead $25
Fixed manufacturing overhead $598,000
Variable selling and administrative expenses $18
Fixed selling and administrative expenses $414,000

Lovell Computer Parts management requests that the total cost per unit be used in cost-plus pricing its products. On this particular product, management also directs that the target price be set to provide a 23% return on investment (ROI) on invested assets of $1,000,000.

Assuming that the volume is 36,800 units, compute the markup percentage and target selling price that will allow Lovell Computer Parts to earn its desired ROI of 23% on this new component. (Round answers to 2 decimal places, e.g. 10.50% or 10.50.)

Markup percentage %
Target selling price $

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image_2

Step: 3

blur-text-image_3

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Audit Skill Management Ref PPAP ISO 9000 And ISO 14000 Series

Authors: FULBODH CHAUDHARY

1st Edition

1520470843, 978-1520470849

More Books

Students also viewed these Accounting questions