Chapter 8, Problem 8.18E

(a)

To determine

Total cost pricing: It is an approach to fix a price of a product that includes all the costs such as all variable costs and fixed costs associated for manufacturing a product.

To determine: The total cost per unit of a mechanical alligator

(b)

To determine

Return on investment (ROI): This financial ratio evaluates how efficiently the assets are used in earning income from operations. So, ROI is a tool used to measure and compare the performance of a units or divisions or a companies.

Formula for desired ROI per unit:

$\text{Desired ROI per unit =}\frac{\text{Desired ROI percentage×Amount invested}}{\text{Number of units produced}}$

To determine: The desired ROI per session for Corporation S

(c)

To determine

Markup percentage: The percentage of return on investment (ROI) achieved per unit over the total cost of production per unit, is referred to as markup percentage.

Formula for mark-up percentage, under absorption-cost pricing approach:

$\text{Mark-up percentage =}\frac{\left\{\begin{array}{l}\text{Desired ROI per unit+}\\ \text{Selling and administrative expenses per unit}\end{array}\right\}}{\text{<x-custom-btb-me data-me-id="434" class="microExplainerHighlight">Manufacturing cost</x-custom-btb-me> per unit}}$

Absorption-cost Pricing: It is an approach to fix a price of a product that includes only the variable and fixed manufacturing overhead costs incurred for manufacturing a product.

To compute: The markup percentage for mechanical alligators of Corporation S, under absorption-cost pricing approach

(d)

To determine

Variable-cost pricing: This pricing approach is used by the companies to set the target selling price based on all variable manufacturing costs, but fixed costs, plus desired profit.

Markup percentage: The percentage of return on investment (ROI) achieved per unit over the total cost of production per unit, is referred to as markup percentage.

Formula for mark-up percentage, under variable-cost pricing approach:

$\text{Mark-up percentage =}\frac{\left\{\begin{array}{l}\text{Desired ROI per unit+}\\ \text{Fixed cost per unit}\end{array}\right\}}{\text{Variable cost per unit}}$

To compute: The markup percentage for mechanical alligators of Corporation S, under variable-cost pricing approach