Dragon Ltd. uses the Absorption costing approach to cost-plus pricing to set prices for its products. Based on budgeted sales of 86,000 units next year, the unit product cost of a new product is $81.60. The company's selling, general, and administrative expenses for this product are budgeted to be $1,247,000 in total for the year. The company will invested $360,000 in this product and expects a return on investment of 12%.

Required:

1. Calculate the mark-up % on the Absorption cost for this product. (4 marks)

2. Prepare Dragonss Income Statement which proves your mark-up % calculate above is accurate.(Ignore any rounding errors) (5 marks)

3. List three (3) things that Dragons management should consider before committing to this new product. (3 marks)

4. Dragon also wants to introduce a new calculator. To compete effectively, the calculator cant be more than $40. Dragon requires a 20% rate of return on investment on all new products. In order to produce and sell 30,000 calculators each year, the company would have to make an investment of $850,000. What would be the Target Cost per calculator? (4 marks)