Dexter, Inc., is planning to introduce a new product line. Current plans call for the
accounting teacherDexter, Inc., is planning to introduce a new product line. Current plans call for the production and sale of 1,000 units, with estimated production costs as follows:
Variable costs: |
|
|
Manufacturing | $450,000 |
|
Selling and administrative | 100,000 |
|
Total variable costs |
| $ 550,000 |
Fixed costs: |
|
|
Manufacturing | $300,000 |
|
Selling and administrative | 180,000 |
|
Total fixed costs |
| 480,000 |
Total costs |
| $1,030,000 |
The average amount of capital invested in the product line is $900,000 and Dexter's target return on investment is 18%.
a. Compute the markup percentage if the company uses cost-plus pricing based on total cost.
Round to the nearest tenth of a percent (for example, 23.6%). Show calculations.
b. Compute the projected selling price using the markup you computed in part (a). Show calculations.
11 years ago
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