Refer back to P9-51B, where we learned that Wamser Corporation uses cost-plus pricing methods to set the target selling price of its product E2-D2. Because some managers prefer to work with absorption-cost pricing and other managers prefer variable-cost pricing, the accounting department provides information under both approaches using a markup of 50% on absorption cost and a markup of 80% on variable cost.

Instructions

Using the data provided in P9-51B:

(a) Calculate the target price for one unit of E2-D2 using absorption-cost pricing.

(b) Calculate the target price for one unit of E2-D2 using variable-cost pricing.

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Per Unit Total Direct materials $15 25 14 Variable manufacturing overhead Fixed manufacturing overhead Variable selling and administrative expenses $4,000,000 12 Fixed selling and administrative expenses 2,000,000