Chapter 8, Problem 8.20E

Information for Gibbs Corporation is given in E8-7.

Instructions

Using the information given in E8-7, answer the following.

(a) Compute the cost per unit of the fixed manufacturing overhead and the fixed selling and administrative expenses.

(b) Compute the desired ROI per unit. (Round to the nearest dollar.)

(c) Compute the markup percentage and target selling price using absorption-cost pricing. (Round the markup percentage to three decimal places.)

(d) Compute the markup percentage and target selling price using variable-cost pricing. (Round the markup percentage to three decimal places.)

E8-7 Gibbs Corporation produces industrial robots for high-precision manufacturing. The following information is given for Gibbs Corporation.

	Per Unit	Total
Direct materials	$380
Direct labor	$290
Variable manufacturing overhead	$ 72
Fixed manufacturing overhead		$ 1,500,000
Variable selling and administrative expenses	$ 55
Fixed selling and administrative expenses		$ 324,000

The company has a desired ROI of 20%. It has invested assets of $54,000,000. It anticipates production of 3,000 units per year.

Instructions

(a) Compute the cost per unit of the fixed manufacturing overhead and the fixed selling and administrative expenses.

(b) Compute the desired ROI per unit. (Round to the nearest dollar.)

(c) Compute the target selling price.