Question 9.2 Vision Limited manufactures a product that has the following costs: Per unit Per year Direct materials $6.00 Direct labour 5.00 Variable manufacturing overhead 4.00 Fixed manufacturing overhead $360,000 Variable SG&A expenses 5.00 Fixed SG&A expenses 120,000 The company applies the absorption costing approach to cost-plus pricing. The calculations are based on budgeted production and sales of 30,000 units per year. The company has spent $600,000 on this product and expects a return on investment of 15%. Required: a) Calculate the markup on absorption cost. b) Compute the target selling price of the product using the absorption costing approach.
Question 9.2 Vision Limited manufactures a product that has the following costs: Per unit Per year Direct materials $6.00 Direct labour 5.00 Variable manufacturing overhead 4.00 Fixed manufacturing overhead $360,000 Variable SG&A expenses 5.00 Fixed SG&A expenses 120,000 The company applies the absorption costing approach to cost-plus pricing. The calculations are based on budgeted production and sales of 30,000 units per year. The company has spent $600,000 on this product and expects a return on investment of 15%. Required: a) Calculate the markup on absorption cost. b) Compute the target selling price of the product using the absorption costing approach.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question 9.2
Vision Limited manufactures a product that has the following costs:
|
|
Per unit |
Per year |
|
Direct materials |
$6.00 |
|
|
Direct labour |
5.00 |
|
|
Variable manufacturing |
4.00 |
|
|
Fixed manufacturing overhead |
|
$360,000 |
|
Variable SG&A expenses |
5.00 |
|
|
Fixed SG&A expenses |
|
120,000 |
The company applies the absorption costing approach to cost-plus pricing. The calculations are based on budgeted production and sales of 30,000 units per year.
The company has spent $600,000 on this product and expects a
Required:
a) Calculate the markup on absorption cost.
b) Compute the target selling price of the product using the absorption costing approach.
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