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 15,500 Unit product cost $ 50 Projected annual selling and administrative expenses $ 66,000 Estimated investment required by the company $ 450,000 Desired return on investment (ROI) 18 % The company uses the absorption costing approach to cost-plus pricing. Required: 1. Compute the markup required to achieve the desired ROI. ((Round your final answer to 2 decimal places (i.e., 0.1234 should be entered as 12.34).) 2. Compute the selling price per unit. (Round your intermediate and final answers to 2 decimal places. )
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 15,500 Unit product cost $ 50 Projected annual selling and administrative expenses $ 66,000 Estimated investment required by the company $ 450,000 Desired return on investment (ROI) 18 % The company uses the absorption costing approach to cost-plus pricing. Required: 1. Compute the markup required to achieve the desired ROI. ((Round your final answer to 2 decimal places (i.e., 0.1234 should be entered as 12.34).) 2. Compute the selling price per unit. (Round your intermediate and final answers to 2 decimal places. )
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Exercise A-2 Absorption Costing Approach to Setting a Selling Price [LOA-2]
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 | 15,500 | ||
| Unit product cost | $ | 50 | |
| Projected annual selling and administrative expenses | $ | 66,000 | |
| Estimated investment required by the company | $ | 450,000 | |
| Desired |
18 | % | |
The company uses the absorption costing approach to cost-plus pricing.
Required:
1. Compute the markup required to achieve the desired ROI. ((Round your final answer to 2 decimal places (i.e., 0.1234 should be entered as 12.34).)
2. Compute the selling price per unit. (Round your intermediate and final answers to 2 decimal places. )
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