Qualls Company Makes a Product That Has the Following Costs

question 96

Essay

Qualls Company makes a product that has the following costs:
$\begin{array}{|l|r|r|}\hline & \text { Per unit } & \text { Per year } \\\hline \text { Direct materials } & \$ 17.30 & \\\hline \text { Direct labour } & 12.90 & \\\hline \text { Variable manufacturing overhead } & 4.20 & \\\hline \text { Fixed manufacturing overhead } & & \$ 916,800 \\\hline \text { Variable SG\&A expenses } & 2.00 & \\\hline \text { Fixed SG\&A expenses } & & 907,200 \\\hline\end{array}$
The company uses the absorption costing approach to cost-plus pricing.The pricing calculations are based on budgeted production and sales of 48,000 units per year.
The company has invested $360,000 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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Definitions:

Bureaucratic Structure

An organizational structure characterized by formal procedures, hierarchy, and clear division of labor.

Authority-And-Responsibility

Concerns the distribution of tasks and the accompanying expectation of accountabilities within an organization, ensuring that individuals have the rights and obligations to execute their roles.

Scalar Principle

An organizational principle that outlines a clear and direct line of authority in the hierarchy from the top of the organization to the lowest level.

Boundaryless Organizations

Organizations that are not defined by, or limited to, traditional hierarchical structures or physical boundaries, enabling more fluid and flexible approaches to business operations.