Wilderness Products, Inc., has designed a self-inflating sleeping pad for use by backpackers and campers. The following information is available about the new product:

a.	An investment of $1,350,000 will be necessary to carry inventories and accounts receivable and to purchase some new equipment needed in the manufacturing process. The companys required rate of return is 24% on all investments.
b.	A standard cost card has been prepared for the sleeping pad, as shown below:

	Standard Quantity or Hours	Standard Price or Rate		Standard Cost
Direct materials	4.0 yards	$	2.70 per yard	$	10.80
Direct labor	2.4 hours	$	8.00 per hour		19.20
Manufacturing overhead (15 variable)	2.4 hours	$	12.50 per hour		30.00
Total standard cost per pad				$	60.00

c.	The only variable selling and administrative expense will be a sales commission of $9 per pad. Fixed selling and administrative expenses will be (per year):

Salaries	$	82,000
Warehouse rent		50,000
Advertising and other		600,000
Total	$	732,000

d.	Because the company manufactures many products, no more than 38,400 direct labor-hours per year can be devoted to production of the new sleeping pads.

e.	Manufacturing overhead costs are allocated to products on the basis of direct labor-hours.

rev: 01_06_2015_QC_CS-3366

3.

value: 10.00 points

Required information

Required:
1.	Assume that the company uses the absorption approach to cost-plus pricing.

a-1.	Compute the selling and administrative expenses.

a-2.	Compute the markup that the company needs on the pads to achieve a 24% ROI if it sells all of the pads it can produce using 38,400 hours of labor time.

b.	Using the markup you have computed, prepare a price quotation sheet for a single sleeping pad. (Round your answers to 2 decimal places.)

c-1.	Assume that the company is able to sell all of the pads that it can produce. Prepare an income statement for the first year of activity.

c-2.	Assume that the company is able to sell all of the pads that it can produce. Compute the company's ROI for the year on the pads.