question archive Simmons Company estimated that the following costs and activity would be associated with Product T: Number of units sold annually 80,000 Required investment $900,000 Unit product cost $35 Total annual selling, general, and administrative expenses $600,000 If the company uses the absorption approach to cost-plus pricing and desires a 20% ROI, the target selling price for Product T would be:
Simmons Company estimated that the following costs and activity would be associated with Product T: Number of units sold annually 80,000 Required investment $900,000 Unit product cost $35 Total annual selling, general, and administrative expenses $600,000 If the company uses the absorption approach to cost-plus pricing and desires a 20% ROI, the target selling price for Product T would be:
Subject:AccountingPrice:2.86 Bought7
Simmons Company estimated that the following costs and activity would be associated with Product T: Number of units sold annually 80,000 Required investment $900,000 Unit product cost $35 Total annual selling, general, and administrative expenses $600,000 If the company uses the absorption approach to cost-plus pricing and desires a 20% ROI, the target selling price for Product T would be:
Purchase A New Answer
Custom new solution created by our subject matter experts
GET A QUOTE
Answer Preview
$44.75
Step-by-step explanation
In absorption costing, product cost consists of variable cost per unit(unit product cost) and fixed cost per unit(selling, general, and administrative expenses per unit).
Target selling price=total cost per unit+ ROI per unit
Unit product cost=$35
selling, general, and administrative expenses per unit=total selling, general, and administrative expenses/annual sales units
selling, general, and administrative expenses per unit=$600,000/80,000=$7.50
total cost per unit=$35+$7.50=$42.50
Return on investment(ROI)=20%*required investment=20%*$900,000=$180,000
ROI per unit=$180,000/80,000=$2.25
target selling price for Product T=$42.50+$2.25=$44.75
