Question :
Leekee Shipyards has a new barnacle-removing product for ocean-going vessels. The company invests $1,000,000 in operating assets and plans to produce and sell 300,000 units per year. Leekee needs to make a return on investment of 20 percent each year. Leekee needs to know what price to charge for this product.
Use the absorption costing approach to evaluate the markup required to make the desired return on investment based on the subsequent 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