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Gerber Clothing Inc. has designed a rain suit for outdoor enthusiasts that is about to be introduced on the market. A standard cost card has been prepared for the new suit, as follows: standard Standard price Standard Quantity or or Rate Cost hours Direct materials 2.0 metres $ 15 per metre $30.00 Direct labour 1.0 hours 35 per hour 35.00 Manufacturing overhead (1/6 variable) 1.0 hours 15 per hour 15.00 Total standard cost per suit $80.00 a. The only variable selling and administrative costs will be $5 per suit for shipping. Fixed selling and administrative costs will be as follows (per year): Salaries S 55 , 300 Advertising and other 24 E , 000 Total 5 303,300 c. Since the company manufactures many products. it is felt that no more than 10,700 hours of labour time per year can be devoted to production ofthe new suits. d. An investment of $570,000 will be necessary to carry inventories and accounts receivable and to purchase some new equipment. The company wants a 20% ROI in new product lines. e. Manufacturing overhead costs are allocated to products on the basis of direct labour-hours. Required: 1. Assume that the company uses the absorption approach to cost-plus pricing. 8. Compute the markup that the company needs on the rain suits to achieve a 20% ROI if it sells all of the suits it can produce using 10,700 hours of labour time. b. Using the markup you have computed, prepare a price quote sheet for a single rain suit. (Round your answers to 2 decimal places.) Direct materials Direct labour Manufacturing overhead Unit product cost Add markup of unit product cost Target selling price c-1. Assume that the company is able to sell all of the rain suits that it can produce. Prepare an income statement for the rst year of activity. Less cost of goods sold Gross margin Less selling, general, and administrative expenses: Shipping Salaries Advertising and other Total selling, general, and administrative expense Operating income c-2. Compute the company's ROI for the year on the suits, using the ROI formula. (Do not round intermediate calculations.) % 2. Repeat requirements 1a and 1b above, assuming that the company uses the total variable costing approach to costplus pricing. (Do not round intermediate calculations. Round your answers to 2 decimal places.) Markup percentage for the total variable costing Target selling price