P9.64B (LO 3, 4) Santana Furniture Inc. is setting a target price on its newly designed leather recliner sofa. Cost data for the sofa at a budgeted volume of 3,000 units are as follows: Per Unit Total Direct materials $140 Direct labour 80 Variable manufacturing overhead 40 Fixed manufacturing overhead $180,000 Variable selling and administrative expenses 20 Fixed selling and administrative expenses 90,000 Santana Furniture uses cost-plus pricing to provide a 30% ROI on its stuffed furniture line. A total of $700,000 in assets has been committed to the production of the new leather recliner sofa. Instructions a. Calculate the markup percentage under the absorption-cost approach that will allow Santana Furniture to realize its desired ROI. a. 37.5% b. Calculate the target price of the sofa under absorption-cost pricing, and show proof that the desired ROI is realized. c. Calculate the markup percentage under the variable-cost approach that will allow Santana Furniture to realize its desired ROI. c. 57.143% d. Calculate the target price of the sofa under variable-cost pricing, and show proof that the desired ROI is realized. e. Since both absorption-cost pricing and variable-cost pricing produce the same target price and provide the same ROI, why do both methods exist? Isn't one method clearly better than the other