Zelmer Corporation needs to set a target price for its newly designed product QB-14. The following data relate to this new product.

The costs above are based on a budgeted volume of 250,000 units produced and sold each year. Zelmer uses cost-plus pricing methods to set its target selling price. Because some managers prefer absorption-cost pricing and others prefer variable-cost pricing, the accounting department provides information under both approaches using a markup of 60% on unit manufacturing cost and a markup of 100% on variable cost.

Instructions
(a) Compute the target price for one unit of QB-14 using absorption-cost pricing.
(b) Compute the target price for one unit of QB-14 using variable-costpricing.

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Per Unit $50 $30 $13 Total Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead Variable selling and administrative expenses Fixed selling and administrative expenses $8,000,000 $ 7 $2,000,000