Vision Limited manufactures a product that has the following costs: Per unit Per year Direct materials $6.00
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Vision Limited manufactures a product that has the following costs:
Per unit | Per year | |
Direct materials | $6.00 | |
Direct labour | 5.00 | |
Variable manufacturing overhead | 4.00 | |
Fixed manufacturing overhead | $360,000 | |
Variable SG&A expenses | 5.00 | |
Fixed SG&A expenses | 120,000 |
The company applies the absorption costing approach to cost-plus pricing. The calculations are based on budgeted production and sales of 30,000 units per year. The company has spent $600,000 on this product and expects a return on investment of 15%. Required: a) Calculate the markup on absorption cost. b) Compute the target selling price of the product using the absorption costing approach.
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