EXERCISE A-2 Absorption Costing Approach to Setting a Selling Price (LO2] Martin Company is considering the introduction of a new product. To determine a selling price, the company has gathered the following information: Number of units to be produced and sold each year. Unit product cost.... Projected annual selling and administrative expenses Estimated investment required by the company Desired return on investment (ROI)... 14,000 $25 $50,000 $750,000 12% ... Required: The company uses the absorption costing approach to cost-plus pricing. 1. Compute the markup required to achieve the desired ROI. 2. Compute the selling price per unit.
EXERCISE A-2 Absorption Costing Approach to Setting a Selling Price (LO2] Martin Company is considering the introduction of a new product. To determine a selling price, the company has gathered the following information: Number of units to be produced and sold each year. Unit product cost.... Projected annual selling and administrative expenses Estimated investment required by the company Desired return on investment (ROI)... 14,000 $25 $50,000 $750,000 12% ... Required: The company uses the absorption costing approach to cost-plus pricing. 1. Compute the markup required to achieve the desired ROI. 2. Compute the selling price per unit.
Chapter1: Financial Statements And Business Decisions
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![EXERCISE A-2 Absorption Costing Approach to Setting a Selling Price (LOZI
Martin Company is considering the introduction of a new product. To determine a selling price, the
company has gathered the following information:
Number of units to be produced and sold each year.
Unit product cost.
Projected annual selling and administrative expenses
Estimated investment required by the company.
Desired return on investment (ROI) . .
14,000
$25
... .
$50,000
$750,000
....
12%
Required:
The company uses the absorption costing approach to cost-plus pricing.
1. Compute the markup required to achieve the desired ROI.
2. Compute the selling price per unit.
EXERCISE A-3 Target Costing [LO3]
Shimada Products Corporation of Japan is anxious to enter the electronic calculator market. Man-
agement believes that in order to be competitive in world markets, the price of the electronic calcu-
lator that the company is developing cannot exceed $15. Shimada's required rate of return is 12%
on all investments. An investment of $5,000,000 would be required to purchase the equipment
needed to produce the 300,000 calculators that management believes can be sold each year at the
$15 price.
Required:
Compute the target cost of one calculator.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F59feeb1c-1a18-4288-8dde-e4602936cf8d%2F535522db-14a6-429b-a2d4-e1f4ff68c404%2Fxjp2tbg_processed.jpeg&w=3840&q=75)
Transcribed Image Text:EXERCISE A-2 Absorption Costing Approach to Setting a Selling Price (LOZI
Martin Company is considering the introduction of a new product. To determine a selling price, the
company has gathered the following information:
Number of units to be produced and sold each year.
Unit product cost.
Projected annual selling and administrative expenses
Estimated investment required by the company.
Desired return on investment (ROI) . .
14,000
$25
... .
$50,000
$750,000
....
12%
Required:
The company uses the absorption costing approach to cost-plus pricing.
1. Compute the markup required to achieve the desired ROI.
2. Compute the selling price per unit.
EXERCISE A-3 Target Costing [LO3]
Shimada Products Corporation of Japan is anxious to enter the electronic calculator market. Man-
agement believes that in order to be competitive in world markets, the price of the electronic calcu-
lator that the company is developing cannot exceed $15. Shimada's required rate of return is 12%
on all investments. An investment of $5,000,000 would be required to purchase the equipment
needed to produce the 300,000 calculators that management believes can be sold each year at the
$15 price.
Required:
Compute the target cost of one calculator.
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