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Robo Parts 100000

Price: $2.50


Robo Parts Inc. is in the process of setting a selling price on a new robotics component
it has just designed and developed. The following cost estimates for this new component
have been provided by the accounting department for a budgeted volume of 100,000 units.

Per Unit Total
Direct materials   30
Direct labor   20
Variable manufacturing overhead   17
Fixed manufacturing overhead   2,500,000
Variable selling and administrative expenses   8
Fixed selling and administrative expenses   500,000
Robo’s management requests that the total cost per unit be used in cost-plus pricing its
products. On this particular product, management also directs that the target price be set
to provide a 30% return on investment (ROI) on invested assets of $3,000,000.

Instructions
(Round all calculations to two decimal places.)
(a) Compute the markup percentage and target selling price that will allow Robo to earn
its desired ROI of 30% on this new component.
(b) Assuming that the volume is 80,000 units, compute the markup percentage and
target selling price that will allow Robo to earn its desired ROI of 30% on this new
component.

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