Martin Company uses the absorption costing approach to cost-plus pricing. It 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 6,000 Unit product cost $ 50 Estimated annual selling and administrative expenses $ 24,000 Estimated investment required by the company $ 300,000 Desired return on investment (ROI) 12 % Required: 1. Compute the markup percentage on absorption cost required to achieve the desired ROI. 2. Compute the selling price per unit. (Do not round intermediate calculations. Round your answer to 2 decimal places.)
Martin Company uses the absorption costing approach to cost-plus pricing. It 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 6,000 Unit product cost $ 50 Estimated annual selling and administrative expenses $ 24,000 Estimated investment required by the company $ 300,000 Desired return on investment (ROI) 12 % Required: 1. Compute the markup percentage on absorption cost required to achieve the desired ROI. 2. Compute the selling price per unit. (Do not round intermediate calculations. Round your answer to 2 decimal places.)
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Martin Company uses the absorption costing approach to cost-plus pricing. It 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 | 6,000 | ||
| Unit product cost | $ | 50 | |
| Estimated annual selling and administrative expenses | $ | 24,000 | |
| Estimated investment required by the company | $ | 300,000 | |
| Desired |
12 | % | |
Required:
1. Compute the markup percentage on absorption cost required to achieve the desired ROI.
2. Compute the selling price per unit. (Do not round intermediate calculations. Round your answer to 2 decimal places.)
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