LuxMax Corporation is the maker of gold key chain. The key chain cost $50 each to manufacture ( variable and fixed cost). The investors of the company want to earn a 20% return on their investment of $100,000 ($20,000). LuxMax has budgeted its volume of sales to be 5,000 units. LuxMax has decided to price each unit to earn a 20% return on investment.

1. how much in dollars should the cost of each unit be marked up so that the 20% return on investment is achieved.

2. what should the selling price be on each unit?

3. what is the formula to calculate the markup percentage?

4. using the markup percentage calculate the selling price of each unit.?

5. when should a company consider the cost-plus pricing versus the target costing approach?