• The following anticipated data are for the next year of operations: Per unit

  ($) 20

  Direct material cost: ($) 20

  Direct labor cost: 10

  Variable production overhead 10

  Variable nonproduction overhead 5

  They are estimated the fixed production overhead; fixed nonproduction overhead of 5'mil 0.9 and 5'mil 0.1 respectively. There is no opening inventory; budgeted production and sales volume is 120,000 units.

  Requirements:

  1. Compute product cost under absorption costing and unit selling price if the markup percentage is 50% of product cost.  

  2. If the company want to achieve target net income of $'mil 3.6, how many percentages of margin on variable cost should be applied?  

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