ACME Incorporated has cost information for a potential new product as follows: Direct material per unit $8.00
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Question:
ACME Incorporated has cost information for a potential new product as follows:
Direct material per unit | $8.00 |
Direct labour per unit | $5.00 |
Manufacturing overhead per year | $250,000 |
Selling and administrative per year | $150,000 |
Additional information:
- the company plans to produce and sell 30,000 units per year
- manufacturing overhead costs are 80% fixed and the remainder variable
- selling and administrative costs include a variable amount of $4 per unit
- the company wants a 20% ROI on new products
- an investment in inventories and new equipment totalling $400,000 will be needed
Required:
Calculate the markup percent the company will have to use to achieve the desired ROI using the total variable costing approach.
Related Book For
Management Accounting
ISBN: 978-0132570848
6th Canadian edition
Authors: Charles T. Horngren, Gary L. Sundem, William O. Stratton, Phillip Beaulieu
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