LPM Company has been a market leader since 20X3, 15 years after it was established. The company was taken over seven years ago and management has been working hard to make it the best in the industry. LPM has some control over setting the prices and uses the cost-plus pricing method. The company has been using a full production cost plus mark-up of 90% to set the selling prices. The following information has been provided with respect to one of its products (at normal capacity):

Direct material cost R30 000

Direct labour cost R40 000

Manufacturing overheads R60 000

Selling and distribution costs R45 000

The company has found from past experience that variable manufacturing overheads make up 60% of the manufacturing overheads. Variable non-manufacturing cost equals 40% of selling and distribution cost. The company is looking at changing its cost bases.

Required:

1. If the company continues using the current cost base, how much will the selling price be?
2. If the company uses variable manufacturing costs and adds mark-up of 100% how much will the selling price be?
3. If the company uses total cost, how much will the selling price be if you use the same mark-up percentage as in (a)?