South Seas Products, Inc., has designed a new surfboard to replace its old surfboard line. Because of the unique design of the new surfboard, the company anticipates that it will be able to sell all the boards that it can produce. On this basis, the following incomplete budgeted income statement for the first year of activity is available: 1,033,600 Sales ( 2 boards at 2 per board) Cost of goods sold ( 2 boards at 2 per board) Gross margin Selling and administrative expenses Net operating income 656,000 S7 Additional information on the new surfboard follows: a. An investment of $1,380,000 will be necessary to carry inventories and accounts receivable and to purchase some new equipment. The company's required rate of return is 18% on all investments. b. A partially completed standard cost card for the new surfboard follows: Standard Cost Standard Quantity or Hours 4.00 feet 2.5 hours 7 hours Direct materials Direct labor Manufacturing overhead Total standard cost per surfboard S Standard Price or Rate 5.00 per foot ? per hour ? per hour S ? c. The company will employ 17 workers to make the new surfboards. Each will work a 40-hourweek, 50 weeks a year. d. Other information relating to production and costs follows: Variable manufacturing overhead cost (per board) Variable selling expense (per board) Fixed manufacturing overhead cost (total) Fixed selling and administrative expense (total) Number of boards produced and sold (per year) $ $ $ $ 5.00 9.80 367,200 e. Overhead costs are allocated to production on the basis of direct labor-hours. Required: 1. Complete the standard cost card for a single surfboard. (Round your answers to 2 decimal places.) Standard Cost $ 20.00 $ Direct materials Direct labor Manufacturing overhead Standard Quantity or Hours 4.00 feet 2.50 hours hours Standard Price or Rate 5.00 per foot per hour per hour Total standard cost per surfboard 2. Assume that the company uses the absorption costing approach to cost-plus pricing. a. Compute the markup that the company needs on the surfboards to achieve a 18% return on investment (ROI). (Round your percentage answer to 1 decimal place i.e., 123 is considered as 12.3) Markup percentage b. Using the markup you have computed, calculate the target selling price. (Round your final answer to 2 decimal places.) Target selling price per board C. Assume, as stated, that the company can sell all the surfboards that it can produce c. Assume, as stated, that the company can sell all the surfboards that it can produce. C-1. Complete the income statement for the first year of activity. (Round your selling price per unit to 2 decimal places.) Sales * boards boards per board per board Cost of goods sold Gross margin Selling and administrative expenses Net operating income C-2. Compute the company's ROI for the year. ROI Choose Denominator: Choose Numerator: = ROI ROL