Alma's Recording Studio rents studio time to musicians in 2-hour blocks. Each session includes the use of the studio facilities, a digital recording of the performance, and a professional music producer/mixer. Anticipated annual volume is 1,230 sessions. The company has invested $2,337,000 in the studio and expects a return on investment (ROI) of 19%. Budgeted costs for the coming year are as follows. Per Session Total Direct materials (CDs, etc.) $ 19.95 Direct labor $414.00 Variable overhead $ 49.00 Fixed overhead $1,172,190 Variable selling and administrative expenses $ 43.00 Fixed selling and administrative expenses $616,230 Determine the total cost per session. (Round answer to 2 decimal places, e. G. 10.50.)

a) •Direct Materials =>$19.95

•Direct Labor=>$414

•Variable Overhead=>$49

•Fixed overhead =>$953

•Variable Selling and Administrative Expenses=>$43

•Fixed Selling and Administrative Expenses=>$498

•Total Cost Per Session$1,979.95

b) $361

c) 18.23℅

d) $2340.89

Explanation:

a)The total cost per session will be:

Per Session:

•Direct Materials =>$19.95

•Direct Labor=>$414

•Variable Overhead=>$49

•Fixed overhead (1,172,190/1230)=>$953

•Variable Selling and Administrative Expenses=>$43

•Fixed Selling and Administrative Expenses (616,230/1,230)=>$498

•Total Cost Per Session$1,979.95

b) To find desired ROI per session, we use:

(Investment Amount*ROI Percentage)/Number of Sessions

= (2,337,000 * 19℅) / 1230

= $361

c) The mark-up percentage on total cost per session =

Desired ROI Per Session/Total Cost Per Session*100

Using the values from Part a) and b) above, we have:

Mark-Up Percentage on Total Cost Per Session = (361/1,979.95)*100 = 18.23%

d) The target price per session =

Total Cost Per Session + Total Cost Per Session*Mark-Up Percentage on Total Cost Per Session

Using the values from a) and c) above, we have:

Target Price Per Session = 1,979.95 +(1,979.95*18.23%) = $2,340.89

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