Question

Schopp Corporation makes a mechanical stuffed alligator that sings the Martian national anthem. The following information is available for Schopp Corporation's anticipated annual volume of 544,000 units.
Per Unit Total
Direct materials $6.87
Direct labor $10.77
Variable manufacturing overhead $15.00
Fixed manufacturing overhead $3,318,400
Variable selling and administrative expenses $14.04
Fixed selling and administrative expenses $1,626,560

The company has a desired ROI of 23%. It has invested assets of $27,351,000.

Required:
a. Compute the total cost per unit
b. Desired ROI
c. Markup percentage using target cost

Answer 1

Answer:

a)Total cost per unit  =$41.729

b)ROI = $6,290,730.

c) Mark-up = 27.7%

Explanation:

a)

The total cost per unit = variable cost + fixed cost per unit

Fixed cost unit = ($3,318,400 +$1,626,560)/544,000 units

                       = 9.089

Total cost per unit = 6.87+10.77+15 +9.089

=$41.729

b)

Desired ROI =  23%. ×  27,351,000=  $6,290,730.

c)

Mark-up

Mark-up is profit/target cost cost

Profit per unit = $6,290,730./544,000 units

                       =   11.56   =

Mark-up = (11.56/41.729) × 100 = 27.7%