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Alma Recording Studio

Price: $1.99

Alma’s Recording Studio rents studio time to musicians in 2-hour blocks. Each session
includes the use of the studio facilities, a digital recording of the performance, and
a professional music producer/mixer. Anticipated annual volume is 1,000 sessions. The
company has invested $2,352,000 in the studio and expects a return on investment (ROI)
of 20%. Budgeted costs for the coming year are as follows.
  Per Session Total
Direct materials (tapes, CDs, etc)  20
Direct labor  400
Variable overhead  50
Fixed overhead  950,000
Variable selling and administrative expenses  40
Fixed selling and administrative expenses  500,000

(a) Determine the total cost per session.
(b) Determine the desired ROI per session.
(c) Calculate the markup percentage on the total cost per session.
(d) Calculate the target price per session.

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