Vision Limited manufactures a product that has the following costs: Per...
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Accounting
Vision Limited manufactures a product that has the following costs:
Per unit
Per year
Direct materials
$6.00
Direct labour
5.00
Variable manufacturing overhead
4.00
Fixed manufacturing overhead
$360,000
Variable SG&A expenses
5.00
Fixed SG&A expenses
120,000
The company applies the absorption costing approach to cost-plus pricing. The calculations are based on budgeted production and sales of 30,000 units per year. The company has spent $600,000 on this product and expects a return on investment of 15%. Required: a) Calculate the markup on absorption cost. b) Compute the target selling price of the product using the absorption costing approach.
Vision Limited manufactures a product that has the following costs:
| Per unit | Per year |
Direct materials | $6.00 |
|
Direct labour | 5.00 |
|
Variable manufacturing overhead | 4.00 |
|
Fixed manufacturing overhead |
| $360,000 |
Variable SG&A expenses | 5.00 |
|
Fixed SG&A expenses |
| 120,000 |
The company applies the absorption costing approach to cost-plus pricing. The calculations are based on budgeted production and sales of 30,000 units per year. The company has spent $600,000 on this product and expects a return on investment of 15%. Required: a) Calculate the markup on absorption cost. b) Compute the target selling price of the product using the absorption costing approach.
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