Skylark Company is in the process of setting a selling price for its newest model stunt kite, the Looper. The controller of Skylark estimates variable cost per unit for the new model to be as follows: Direct materials $15 Direct labor 8 Variable manufacturing overhead 4 Variable selling and administrative expenses 5 $32 In addition, Skylark anticipates incurring the following fixed cost per unit at a budgeted sales volume of 20,000 units: Total Costs ÷ Budget Volume = Cost per Unit Fixed manufacturing overhead $240,000 20,000 $12 Fixed selling and administrative expenses 260,000 20,000 13 Fixed cost per unit $25 Skyhigh uses cost-plus pricing and would like to earn a 10 percent return on its investment (ROI) of $400,000. Instructions Compute the selling price that would provide Skylark a 10 percent ROI.
Skylark Company is in the process of setting a selling price for its newest model stunt kite, the Looper. The controller of Skylark estimates variable cost per unit for the new model to be as follows:
Direct materials $15
Direct labor 8
Variable manufacturing
Variable selling and administrative expenses 5
$32
In addition, Skylark anticipates incurring the following fixed cost per unit at a budgeted sales volume of 20,000 units:
Total Costs ÷ Budget Volume = Cost per Unit
Fixed manufacturing overhead $240,000 20,000 $12
Fixed selling and administrative expenses 260,000 20,000 13
Fixed cost per unit $25
Skyhigh uses cost-plus pricing and would like to earn a 10 percent
Instructions
Compute the selling price that would provide Skylark a 10 percent ROI.
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