Gilder Corporation manufactures a product that has the following costs:
Per unit Per year
Direct materials $6.00
Direct labour $5.00
Variable manufacturing overhead $4.00
Fixed manufacturing overhead $360,000
Variable SG&A expenses $5.00
Fixed SG&A expenses $120,000
The company uses the absorption costing approach to cost-plus pricing. The pricing calculations are based on budgeted production and sales of 30,000 units per year.
The company's markup must be enough to cover the projected SG&A for the year and profit of $90,000.
Required:
(a.) Compute the absorption cost of the product.
(b.) Compute the required markup percentage.
(c.) Compute the target selling price of the product.