*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.