Problem 21-02A

Lovell Computer Parts Inc. is in the process of setting a selling price on a new component it has just designed and developed. The following cost estimates for this new component have been provided by the accounting department for a budgeted volume of 50,000 units.

Per UnitTotalDirect materials$53Direct labor$21Variable manufacturing overhead$23Fixed manufacturing overhead$650,000Variable selling and administrative expenses$22Fixed selling and administrative expenses$450,000

Lovell Computer Parts management requests that the total cost per unit be used in cost-plus pricing its products. On this particular product, management also directs that the target price be set to provide a 30% return on investment (ROI) on invested assets of $1,000,000.

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Compute the markup percentage and target selling price that will allow Lovell Computer Parts to earn its desired ROI of 30% on this new component.(Round markup percentage to 2 decimal places, e.g. 10.50%.)

Markup percentage

%Target selling price$

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Assuming that the volume is 40,000 units, compute the markup percentage and target selling price that will allow Lovell Computer Parts to earn its desired ROI of 30% on this new component.(Round answers to 2 decimal places, e.g. 10.50% or 10.50.)

Markup percentage

%Target selling price$

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