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 Williams's part has been growing in the past two 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 next downturn.

	Variable manufacturing	$4,680,000
	Variable selling and administrative	$855,650
	Plant-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
Markup %s for product pricing:
a) full manufacturing cost		55%
b) full life-cycle cost		30%
c) desired gross margin percentage		40%
d) desired life-cycle cost to sales percentage		25%
e) before-tax ROI		15%
Required
1. Determine the price for the part using a markup of 45 percent of full manufacturing cost.
2. Determine the price for the part using a markup of 25 percent of full life-cycle cost.
3. Determine the price for the part using a desired gross margin percentage to sales of 40 percent.
4. Determine the price for the part using a desired life-cycle cost percentage to sales of 25 percent.
5. Determine the price for the part using a desired before-tax return on investment of 15 percent.
6. Determine the contribution margin and operating profit for each of the methods in requirements 1 through 5. Which price would you choose, and why?