Gill Corporation needs to set a target price for its newly designed product M14-M16. The following data relate to this new product.
Per Unit Total
Direct materials $20
Direct labor $42
Variable manufacturing overhead $10
Fixed manufacturing overhead $1,440,000
Variable selling and administrative expenses $5
Fixed selling and administrative expenses $1,040,000
These costs are based on a budgeted volume of 80,000 units produced and sold each year. Gill uses cost-plus pricing methods to set its target selling price. The markup on total unit cost is 30%.
1. Compute the desired ROI per unit for M14-M16.
2. Compute the target selling price for M14-M16.