Concept explainers
National Corporation needs to set a target price for its newly designed product M14-M16. The following data relate to this new product.
Per Unit | Total | |
Direct materials | $25 | |
Direct labor | $40 | |
Variable manufacturing |
$10 | |
Fixed manufacturing overhead | $1,440,000 | |
Variable selling and administrative expenses | $ 5 | |
Fixed selling and administrative expenses | $ 960,000 |
These costs are based on a budgeted volume of 80,000 units produced and sold each year. National uses cost-plus pricing methods to set its target selling price. The markup percentage on total unit cost is 40%.
Instructions
(a) Compute the total variable cost per unit, total fixed cost per unit, and total cost per unit for M14-M16.
(b) Compute the desired
(c) Compute the target selling price for M14-M16.
(d) Compute variable cost per unit, fixed cost per unit, and total cost per unit assuming that 60,000 M14-M16s are produced and sold during the year.
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Managerial Accounting: Tools for Business Decision Making
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