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The DELL Company is in the process of developing a new product called (ZZ). The...

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Question

Accounting

The DELL Company is in the process of developing a new product called (ZZ). The product current design carries with it following costs:

Statements

Total Costs

Total variable production costs

780,000

Fixed manufacturing overhead

220,000

Total production costs

1,000,000

Total selling, general, and administrative expenses

400,000

Total costs and expenses

1,400,000

  • Units to be Produced 40,000.
  • The company requires a $ 320,000 profit, and 20% return on assets (ROA).
  • The company uses assets totaling $ 1,600,000 in producing.

Instructions:

  1. Compute the price of (ZZ) using the Gross margin pricing method. (4 marks)
  2. Compute the price of (ZZ) using the Return on assets pricing method. (4 marks)
  3. Prepare income statement to support your answer. (4 marks)

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