*P8-7B Zelmer Corporation needs to set a target price for its newly designed product QB-14. The following data relate to this new product.
Per Unit Total
Direct materials $50
Direct labor $30
Variable manufacturing overhead $13
Fixed manufacturing overhead $8,000,000 Variable selling and administrative expenses $ 7
Fixed selling and administrative expenses $2,000,000
The costs above are based on a budgeted volume of 250,000 units produced and sold each year. Zelmer uses cost-plus pricing methods to set its target selling price. Because some managers prefer absorption-cost pricing and others prefer variable-cost pricing, the ac- counting department provides information under both approaches using a markup of 60% on unit manufacturing cost and a markup of 100% on variable cost.
Instructions
(a) Compute the target price for one unit of QB-14 using absorption-cost pricing.
(b) Compute the target price for one unit of QB-14 using variable-cost pricing.