Ritchie Corporation Manufactures a Product That Has the Following Costs

question 140

Essay

Ritchie Corporation manufactures a product that has the following costs:
$\begin{array}{|l|r|r|}\hline & \text { Per unit } & \text { Per year } \\\hline \text { Direct materials } & \$ 20.70 & \\\hline \text { Direct labour } & 11.80 & \\\hline \text { Variable manufacturing overhead } & 3.20 & \\\hline \text { Fixed manufacturing overhead } & & \$ 817,700 \\\hline \text { Variable SG\&A expenses } & 4.10 & \\\hline \text { Fixed SG\&A expenses } & & 691,900 \\\hline\end{array}$
The company uses the absorption costing approach to cost-plus pricing.The pricing calculations are based on budgeted production and sales of 37,000 units per year.
The company has invested $160,000 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:

Means of Production

Refers to the physical and non-physical inputs used in the production of goods and services, including factories, machinery, and capital.

Labor Problem

Issues arising from the employment relationship, typically involving disputes over working conditions, wages, or treatment of workers.

Human Resources School

An approach to management that emphasizes the importance of effective personnel management and the well-being of employees in the workplace.

Commodities

Goods or services that are considered interchangeable with others of the same type, often used in the context of trade and economic markets.