Rugged footwear CC has designed and developed a new hiking sandal, Trudgers which is readyto be introduced to the market. The projected standard costs for each pair of Trudgers are as Direct materials Direct labour Manufacturing overheads (20% variable) Total standard manufactured cost per pair follows: Advertising and promotions Salaries and other costs 0.25 hours 0.25 hours Standard rate ($) 120.00 160.00 The following additional information relating to Trudgers is available: a) The only variable non-manufacturing costs for Trudgers will be N$10 per pair for distribution. Annual fixed selling, administrative and general costs allocated to the product are expected to be: Standard cost ($) 1.3. N$ 400 000 b) As the firm manufactures a wide range of other products, managements expects that no more than 2 000 direct labour hours per year will be available for production of Trudgers. 160 000 560 000 c) An investment of $900 000 in new equipment and working capital will be required for the new line. The owners of Rugged footwear CC requires a return on investment (ROI) of 24% on new products d) Manufacturing overhead costs are allocated to products on the basis of direct labour hours. Non-manufacturing overheads are allocated on a unit basis. 120.00 30.00 40.00 190.00 REQUIRED: assume the firm uses absorption (total costs) approach to cost- plus pricing. 1.1. Calculate the mark-up that is needed to achieve 24% ROI. 1.2. Using the mark-up calculated above in (a), calculate the selling price for one pair of Trudger. Assuming that all of the sandals that can be produced can be sold at the price calculated in (b) above, prepare an income statement for Trudgers for the first year of production. TOTAL MARKS Marks 6 2 7 15