Answer:
Gibbs Corporation
1) Fixed cost per unit
= $810
2) ROI per unit
= $4,277
3) Markup percentage = Total cost per unit
= 252-927%
3b) Target selling price, using absorption costing
= Total cost per unit plus Markup
= $5,960
Explanation:
a) Data and Calculations:
Per Unit Total
Direct materials $410
Direct labor $340
Variable manufacturing overhead $ 75
Fixed manufacturing overhead $1,708,000
Variable selling and administrative expenses $ 56
Fixed selling and administrative expenses $ 560,000
Total variable and fixed costs $881 $2,268,000
ROI = 22% = $11,974,600 ($54,430,000 * 22%)
Invested assets = $54,430,000
Estimated annual production units = 2,800
1) Fixed cost per unit = $810 ($2,268,000/2,800)
2) ROI per unit = $4,277 ($11,974,600/2,800)
3) Markup percentage = Total cost per unit = $4,277/$1,691 * 100 = 252.927%
3b) Target selling price, using absorption costing
= Total cost per unit plus Markup = $5,960 ($1,691 + $4,277)
