(Appendix 12A)Ritchie Corporation Manufactures a Product That Has the Following

Essay

(Appendix 12A)Ritchie Corporation manufactures a product that has the following costs:

$\begin{array}{lrr} & \text { Per unit }& \text { Per year } \\\text { Direct materials }&\$20.70\\\text { Direct labour } & 11.80 & \\\text { Variable manufacturing overhead } & 3.20 & \\\text { Fixed manufacturing overhead } & & \$ 817,700 \\\text { Variable SG\&A expenses } & 4.10 & \\\text { Fixed SG\&A expenses } & & 691,900\end{array}$

The company uses the absorption costing approach to cost-plus pricing. The pricing calculations are based on budgeted production and sales of 37,000 units per year.

The company has invested $160,000 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.