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Calculate the markup percentage and target selling price

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Reference no: EM131898425

Question - Bosworth Electronics Inc. is setting a selling price on a new CDL component it has just developed. The accounting department has provided the following cost estimates for this component for a budgeted volume of 100,000 units:

Per Unit Total

Direct Materials: $30

Direct Labour $20

Variable manufacturing overhead $17

Fixed Manufacturing overhead $2,500,000

Variable selling and administration 8

Fixed selling and administration 500,000

Bosworth's management uses cost-plus pricing to set its selling price. Management also requires the target price to be set to provide a 30% return on investment on invested assets of $3 million.

Instructions -

(a) Calculate the markup percentage and target selling price that will allow Bosworth Electronics to earn its desired ROI of 30% on this new CDL component.

(b) Assuming that the volume is 80,000 units, calculate the markup percentage and target selling price that will allow Bosworth Electronics to earn its desired ROI of 30%.

Reference no: EM131898425

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