Williams Inc. produces a single product, a part used in the manufacture of automobile transmissions. Known for its quality and performance, the part is sold to luxury auto manufacturers around the world. Because this is a quality product, Williams has some flexibility in pricing the part. The firm calculates the price using a variety of pricing methods and then chooses the final price based on that information and other strategic information. A summary of the key cost information follows. Williams expects to manufacture and sell 50,000 parts in the coming year. While the demand for Williamss part has been growing in the past 2 years, management is not only aware of the cyclical nature of the automobile industry, but also concerned about market share and profits during the industrys current downturn.

Total Costs Variable manufacturing $ 4,680,000

Variable selling and administrative 855,650

Facility-level fixed overhead 2,345,875

Fixed selling and administrative 675,495

Batch-level fixed overhead 360,000

Total investment in product line 22,350,000

Expected sales (units) 50,000

Required:

1. Determine the price for the part using a markup of 45% of full manufacturing cost.

2. Determine the price for the part using a markup of 25% of full life-cycle cost.

3. Determine the price for the part using a desired gross margin percentage to sales of 40%.

4. Determine the price for the part using a desired life-cycle cost margin percentage to sales of 25%.

5. Determine the price for the part using a desired before-tax return on investment of 15%.

6. Determine the total contribution margin and total operating profit for each of the methods in requirements 1 through 5.

Determine the price for the part using a markup of 45% of full manufacturing cost. (Do not round intermediate calculations. Round your answer to 4 decimal places.)

Price

$214.1904

per unit

Determine the price for the part using a markup of 25% of full life-cycle cost. (Do not round intermediate calculations. Round your answer to 4 decimal places.)

Price

$222.9255

per unit

Determine the price for the part using a desired gross margin percentage to sales of 40%. (Round your intermediate calculations and answer to 4 decimal places.)

Price

$246.1960

per unit

Determine the price for the part using a desired life-cycle cost margin percentage to sales of 25%. (Round your intermediate calculations and answer to 4 decimal places.)

Price

$237.7870

per unit

Determine the price for the part using a desired before-tax return on investment of 15%. (Round your intermediate calculations and answer to 4 decimal places.)

Price

$245.3958

per unit

Determine the total contribution margin and total operating profit for each of the methods in requirements 1 through 5. (Round your intermediate calculations to 4 decimal places.)

Method	Contribution Margin	Operating Profit
Markup on full manufacturing cost	$5,173,850	1,792,480
Markup on life cycle costs	$5,610,600	2,229,230
Price to achieve desired GM %	$6,774,150	3,392,780
Price to achieve desired LCC %	$6,353,700	2,972,330
Price to achieve desired ROA of 15%	$6,734,140	3,352,770