Leekee Shipyards has a new barnacle removing product for ocean going vessels. The company invests $1,200,000 in operating assets and plans to produce and sell 400,000 units per year. Leekee wants to make a return on investment of 20% each year. Leekee needs to know what price to charge for this product.
Use the absorption costing approach to determine the markup necessary to make the desired return on investment based on the following information:
Per Unit Total
Direct Materials $ 2.00
Direct Labor $ 1.50
Variable Manufacturing Overhead $ 1.00
Fixed Manufacturing Overhead $ 100,000
Variable Selling and Administrative Expense $ 0.10
Fixed Selling and Administrative Expense $ 100,000