Question
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 55,000 units. Per Unit Total Direct materials $ 45 Direct labor $ 25 Variable manufacturing overhead $ 16 Fixed manufacturing overhead $ 605,000 Variable selling and administrative expenses $ 18 Fixed selling and administrative expenses $ 330,000 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 26 % return on investment (ROI) on invested assets of $ 1,150,200 .
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