*P8.8A (LO 5), AP Writing Anderson Windows Inc. is in the process of setting a target price on its newly designed tinted window. Cost data relating to the window at a budgeted volume of 4,00) units are as follows. Compute various amounts using absorption-cast pricing and variable-cost pricing. Per Unit Total Direct materials $100 $ 70 $ 20 Direct labor Variable manufacturing overhead Fixed manufacturing overhead Variable selling and administrative expenses Fixed selling and administrative expenses $120,000 $ 10 $102,000 Anderson Windows uses cost-plus pricing methods that are designed to provide the company with a 25% ROI on its tinted window line. A total of $1,016,000 in assets is committed to production of the new tinted window.

Instructions

a. Compute the markup percentage under absorption-cost pricing that will allow Anderson Windows to realize its desired ROI.

b. Compute the target price of the window under absorption-cost pricing, and show proof that the desired ROI is realized.

c. Compute the markup percentage under variable-cost pricing that will allow Anderson Windows to realize its desired ROI. (Round to three decimal places.)

d. Computethetargetpriceofthewindowundervariable-costpricing,andshowproofthatthedesired ROI is realized.

e. Since both absorption-cost pricing and variable-cost pricing produce the same target price and provide the same desired ROI, why do both methods exist? Isnt one method clearly superior to the other?