Lowell 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 the new component have been provided by the accounting department for a budgeted volume of 50,000 units.

Per UnitTotal

Direct materials $50

Direct labor$26

Variable manufacturing overhead $20

Fixed manufacturing overhead $600,000

Variable selling and administrative expenses $19

Fixed selling and administrative expenses $400,000

Lovel Computer Parts management request that the total cost per unit be used in cost-plus pricing in its products. On this particular product, management also directs that the target price to be set to provide 25% return on investment (ROI) on invested assets of $1,000,000.

(a)What is the markup percentage and target selling process that will allow Lovell Computer Parts to earn its desired ROI of 25% on this new component.

(b)Assuming that the volume is 40,000 units, what is the markup percentage and target selling price that will allow Lovell Computer Parts to earn its desired ROI of 25% on this new component?