Gonzalez Corporation needs to set a target price for its newly designed product EverReady. The following data relate to this new product.

The costs shown above are based on a budgeted volume of 80,000 units produced and sold each year. Gonzalez uses cost-plus pricing methods to set its target selling price. Because some managers prefer absorption-cost pricing and others prefer variable-cost pricing, the accounting department provides information under both approaches using a markup of 50% on absorption cost and a markup of 70% on variable cost.

Instructions
(a) Compute the target price for one unit of EverReady using absorption-cost pricing.
(b) Compute the target price for one unit of EverReady using variable-costpricing.

Total Per Unit $20 $40 $10 Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead Variable selling and administrative expenses Fixed selling and administrative expenses $1,200,000 $ 5 $1,120,000