Schopp Corporation makes a mechanical stuffed alligator that sings the Martian national anthem. The following information is available for Schopp Corporation's anticipated annual volume of 477,000 units. Per Unit Total
Direct materials $ 7.22
Direct labor $11.19
Variable manufacturing overhead $14.75
Fixed manufacturing overhead $3,574,060
Variable selling and administrative expenses $14.08
Fixed selling and administrative expenses $1,401,490

The company has a desired ROI of 25%. It has invested assets of $27,168,000.

a. Compute the total cost per unit
b. Desired ROI
c. Markup percentage using target cost

a. The total cost per unit is $57.66

b. The Desired ROI is $14.23

c. The Markup percentage using target cost is 25%

Explanation:

a. In order to calculate the total cost per unit we would have to make the following calculation:

total cost per unit=Direct materials+Direct labor+Variable manufacturing overhead+Fixed manufacturing overhead+Variable selling and administrative expenses+Fixed selling and administrative expenses

Fixed manufacturing overhead per unit=$3,574,060/477,000 units

Fixed manufacturing overhead per unit=$7.49

Fixed selling and administrative expenses per unit=$1,401,490/477,000 units

Fixed selling and administrative expenses per unit=$2.93

Hence, total cost per unit=$7.22+$11.19+$14.75+$7.49+$14.08+$2.93

total cost per unit=$57.66

The total cost per unit is $57.66

b. To calculate the Desired ROI we would have to make the following calculation:

Desired ROI=(desired ROI percentage*invested assets)/annual volume of units

Desired ROI=(25%*$27,168,000)/477,000 units

Desired ROI=$14.23

The Desired ROI is $14.23

c. To calculate the Markup percentage we would have to make the following calculation:

Markup percentage=Desired ROI per unit/total cost per unit

Markup percentage=$14.23/$57.66

Markup percentage=25%

The Markup percentage using target cost is 25%