Gildersleeve Corporation manufactures a product that has the following costs: Per unit Per year… 1 answer below »

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

 

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