Question:
Full-cost pricing to achieve a specified return on investment
This example demonstrates how the profit mark-up can be determined as a percentage of the total budgeted cost for a period. The following data relate to a company which produces a range of products.
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Capital invested in company
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£800,000
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Required return on investment each period
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15%
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Budgeted total cost for next period
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£1,500,000
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One of the company's products, R, incurs a total cost of £35 per unit.
Calculate the cost-plus selling price of one unit of product R.