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MCS,PHD
Argosy University/ Phoniex University/
Nov-2005 - Oct-2011
Professor
Phoniex University
Oct-2001 - Nov-2016
Swenson Windows Inc. is in the process of setting a target price on its newly designed tinted window. Cost data relating to the window at a budgeted volume of 4,000 units are as follows.
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Swenson Windows uses cost-plus pricing methods that are designed to provide the com- pany with a 30% ROI on its tinted window line. A total of $700,000 in assets is committed to production of the new tinted window.
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Instructions
(a)Â Â Compute the markup percentage under absorption-cost pricing that will allow Swenson Windows to realize its desired ROI.
(b)Â Â Compute the target price of the window under absorption-cost pricing, and show proof that the desired ROI is realized.
(c)Â Â Â Compute the markup percentage under variable-cost pricing that will allow Swenson Windows to realize its desired ROI. (Round to three decimal places.)
(d)Â Â Compute the target price of the window under variable-cost pricing, and show proof that the desired ROI is realized.
(e)   Since both absorption-cost pricing and variable-cost pricing produce the same target price and provide the same desired ROI, why do both methods exist? Isn’t one method clearly superior to the other?
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