PROBLEM 12A-4 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: God neten late Cal Timel materiale COE nn Timeat lakaw 30 nn Total standard most nar a. The only variable selling, general, or administrative costs will be $4 per suit for shipping. Fixed selling, general, and administrative costs will be (per year) Salaries $ 45,000 Advertising and other 200,000 Total $245,000 b. Since the company manufactures many products, it is felt that no more than 10,000 hours of labour time per year can be devoted to production of the new suits. C. An investment of $500,000 will be necessary to carry inventories and accounts receivable and to purchase some new equipment. The company wants a 20% return on investment (ROI) in new product lines. d. 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. a 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 10,000 hours of labour time. b Using the markup you have computed, prepare a price quote sheet for a single rain suit. C. Assume that the company is able to sell all of the rain suits that it can produce. Prepare an income statement for the first year of activity, and compute the company's ROI for the year on the suits, using the ROI formula from Chapter 11. 2. Repeat requirements 1a and 1b above, assuming that the company uses the total variable costing approach to cost-plus pricing