Answer Happy

Michael Company is in the business of producing board games. Michael's not really sure if its worth it anymore as electronics are taking over the world! Non-the-less he is trying to decide on going ahead with the latest high tech version of Monopoly and needs to know what he can charge to cover costs and actually make some money. The game will have the following costs: Per Unit Per Year Direct Materials $18.20 Direct Labour 22.30 Variable Manufacturing 2.90 Overhead Fixed Manufacturing Overhead $1,296,000 Variable SG&A expenses 1.10 Fixed SG&A expenses $1,104,000 Michael uses the absorption costing approach to cost-plus pricing. The pricing calculations are based on budgeted production and sales of 60,000 units per year. The company has invested $320,000 in this product and expects a return on investment of 15%. Required: a) Compute the markup based on absorption cost. b) What is the target selling price based on the absorption costing approach?