Chapter 21, Problem 6CP

To determine

Computation of Sales price and Target cost per unit:

The units sold is based on the cost plus markup percentage. In such cases, the need is to compute the cost per completed units by computing it through the method of equivalent production by taking in to consideration the equivalent units of completed and in process inventory and the cost per equivalent unit has to be computed for each element of cost.

After computing the cost per completed unit, the defined percentage of mark-up is added to cost for arriving at the Selling price per unit.

However, the reverse computation may also be required when the estimated market price is given and expected markup %, then the target cost per unit may be computed by deducting the profit margin per unit from selling price to arrive at the amount of target cost per unit.

Requirement1:

TheComputation of Target cost per unit for new product, Cloth shopping bag.

To determine

Requirement2:

The Recommendation on manufacturing of new product.