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 521,000 units.

Per Unit Total
Direct materials $ 7.22
Direct labor $11.19
Variable manufacturing overhead $14.75
Fixed manufacturing overhead $3,574,060
Variable selling and administrative expenses $14.08
Fixed selling and administrative expenses $1,401,490
The company has a desired ROI of 25%. It has invested assets of $27,168,000.
1) Compute the total cost per unit
2) Desired ROI
3) Markup percentage using target cost

Answer 1

Answer and Explanation:

The computation is shown below;

a. The total cost per unit is

Direct materials $7.22

Direct labor $11.19

Variable manufacturing overhead $14.75

Fixed manufacturing overhead $6.86 ($3,574,060 ÷ 521,000)

Variable selling and administrative expenses $14.08

Fixed selling and administrative expenses $2.69 ($1,401,490 ÷ 521000)

Total cost per unit $56.79

2

Desired ROI per unit $13.04 {($27,168,000 × 25%) ÷ 521,000}

3

Desired ROI per unit $13.04

Divide by Total cost per unit $56.79

Markup Percentage 22.96%