Desalvo Corporation Is Introducing a New Product Whose Direct Materials

question 62

Essay

Desalvo Corporation is introducing a new product whose direct materials cost is $41 per unit, direct labor cost is $20 per unit, variable manufacturing overhead is $5 per unit, and variable selling and administrative expense is $4 per unit. The annual fixed manufacturing overhead associated with the product is $120,000 and its annual fixed selling and administrative expense is $8,000. Management plans to produce and sell 8,000 units of the new product annually. The new product would require an investment of $2,192,000 and has a required return on investment of 10%. Management would like to set the selling price on a new product using the absorption costing approach to cost-plus pricing.
Required:
a. Determine the unit product cost for the new product.
b. Determine the markup percentage on absorption cost for the new product.
c. Determine the selling price for the new product using the absorption costing approach.

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Definitions:

Plantarflexion

The movement that increases the angle between the foot and the shin, as seen when standing on tiptoe.

Eversion

The movement of turning the sole of the foot outward or laterally.

Dorsiflexion

The movement that brings the foot closer to the shin, typically observed when elevating the toes.

Femoroacetabular

Pertaining to the joint where the femur (thigh bone) meets the acetabulum of the pelvis, commonly involved in hip movement.