Question 4: 14 Marks

Use cost-plus pricing to determine various amounts.

Ahmed Corporation makes a mechanical stuffed alligator. The following information is available for Ahmed Corporation's expected annual volume of 500,000 units:

Per Unit Total

Direct materials $17

Direct labour 8

Variable selling and administrative expenses 11

Fixed manufacturing overhead $360,000

Variable selling and administrative expenses 4

Fixed selling and administrative expenses 150,000

The company has a desired ROI of 25%. It has invested assets of $24 million.

Instructions

(a) Calculate the total cost per unit. ( 3 Marks)

(b) Calculate the desired ROI per unit ( 3 Marks)

(c) Calculate the markup percentage using the total cost per unit. ( 4 Marks)

(d) Calculate the target selling price. (4 Marks)