Zain Industries has recently patented a new product called Maxi Drive, automobile oil for maximum engine performance. The following annual information was developed by the company's controller for use in price determination: Total Costs Total variable production costs 500,000 Fixed manufacturing overhead 500,000 Selling Expenses 100,000 General, and administrative expenses 400,000 Desired Profit 300,000 Cost of assets employed 100,000 Annual demand for the product is expected to be 1,000,000 quarts. On average, the company now earns a 6% return on assets (ROA). Instructions: Compute the projected unit cost for one quart of Maxi Drive. Prepare the formulas for computing the markup percentage and the selling price for one quart using the gross margin pricing method. ) Using return on assets pricing, compute the price per unit?
Zain Industries has recently patented a new product called Maxi Drive, automobile oil for maximum engine performance. The following annual information was developed by the company's controller for use in price determination: Total Costs Total variable production costs 500,000 Fixed manufacturing overhead 500,000 Selling Expenses 100,000 General, and administrative expenses 400,000 Desired Profit 300,000 Cost of assets employed 100,000 Annual demand for the product is expected to be 1,000,000 quarts. On average, the company now earns a 6% return on assets (ROA). Instructions: Compute the projected unit cost for one quart of Maxi Drive. Prepare the formulas for computing the markup percentage and the selling price for one quart using the gross margin pricing method. ) Using return on assets pricing, compute the price per unit?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Zain Industries has recently patented a new product called Maxi Drive, automobile oil for maximum engine performance. The following annual information was developed by the company's controller for use in price determination:
|
Total Costs |
|
|
Total variable production costs |
500,000 |
|
Fixed manufacturing |
500,000 |
|
Selling Expenses |
100,000 |
|
General, and administrative expenses |
400,000 |
|
Desired Profit |
300,000 |
|
Cost of assets employed |
100,000 |
- Annual demand for the product is expected to be 1,000,000 quarts.
- On average, the company now earns a 6% return on assets (ROA).
Instructions:
- Compute the projected unit cost for one quart of Maxi Drive.
- Prepare the formulas for computing the markup percentage and the selling price for one quart using the gross margin pricing method. )
- Using return on assets pricing, compute the price per unit?
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