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Question #3 15 Marks Use cost-plus pricing to determine various amounts. Robo Parts Inc. is in the process of setting a selling price on a
Question #3 15 Marks Use cost-plus pricing to determine various amounts. Robo Parts Inc. is in the process of setting a selling price on a new robotics 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 100,000 units. Per Unit Total Direct Materials $30 Direct Labour $20 Variable manufacturing overhead $17 Fixed manufacturing overhead $2,500,000 Variable selling & administrative expenses $8 Fixed selling & administrative expenses $500,000 Robo's 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 $3,000,000. Instructions (Round all calculations to two decimal places.) (a) Compute the markup percentage and target selling price that will allow Robo to earn its desired ROI of 30% on this new component. (b) Assuming that the volume is 80,000 units, compute the markup percentage and target selling price that will allow Robo to earn its desired ROI of 30% on this new component
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