Morales Corporation produces microwave units. The following per unit cost information is available:

Direct materials

$38

Direct labor

$23

Variable manufacturing overhead

$12

Fixed manufacturing overhead

$39

Variable selling and administrative expenses

$10

Fixed selling and administrative expenses

$23

Part 1

Morales Corporation must invest $500,000 to produce and market 100,000 microwave ovens. The desired ROI is 30%.

1. Calculate the markup percentage using absorption cost pricing.
2. Calculate the target selling price based on the markup percentage using absorption cost pricing.
3. Prepare the absorption cost pricing income statement.

Part 2

Morales Corporation must invest $150,000 to produce and market 20,000 microwave ovens. The desired ROI is 10%.

1. Calculate the markup percentage using total variable cost pricing.
2. Calculate the target selling price based on the markup percentage using total variable cost pricing.