(Appendix 12A)Qualls Company Makes a Product That Has the Following

Essay

(Appendix 12A)Qualls Company makes a product that has the following costs:

$\begin{array}{lccc}& \underline { \text { Per unit } } & \underline { \text { Per year } } \\\text { Direct materials } & \$ 17.30 & \\\text { Direct labour } & 12.90 & \\\text { Variable manufacturing overhead } & 4.20 & \\\text { Fixed manufacturing overhead } & & \$ 916,800 \\\text { Variable SG\&A expenses } & 2.00 & \\\text { Fixed SG\&A expenses } & & 907,200\end{array}$

The company uses the absorption costing approach to cost-plus pricing. The pricing calculations are based on budgeted production and sales of 48,000 units per year.

The company has invested $360,000 in this product and expects a return on investment of 15%.

Required:

a) Compute the markup on absorption cost.
b) Compute the target selling price of the product using the absorption costing approach.