This Website Has Been Moved to a New Link


P 8-7B Zelmer Corporation

Price: $2.50

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

  Per Unit Total
Direct materials   20
Direct labor   40
Variable manufacturing overhead   10
Fixed manufacturing overhead   1,200,000
Variable selling and administrative expenses   5
Fixed selling and administrative expenses   1,120,000

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.

(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-cost pricing.

No comments:

Post a Comment