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Vision Limited manufactures a product that has the following costs: Per...

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Question

Accounting

Vision Limited 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 applies the absorption costing approach to cost-plus pricing. The calculations are based on budgeted production and sales of 30,000 units per year. The company has spent $600,000 on this product and expects a return on investment of 15%. Required: a) Calculate the markup on absorption cost. b) Compute the target selling price of the product using the absorption costing approach.

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