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appears to have a very large potential market. Because of
competition, Eckert does not believe that it can charge more
than $90 for Little Laser. At this price, Eckert believes it can sell
100,000 of these laser guns. Eckert will require an investment of
$8,000,000 to manufacture, and the company wants an ROI of
20%.
Instructions
a. Determine the target cost for one Little Laser.
E8-6
Alma's Recording Studio rents studio time to musicians in 2-
hour blocks. Each session includes the use of the studio
facilities, a digital recording of the performance, and a
professional music producer/mixer. Anticipated annual volume
is 1,000 sessions. The company has invested $2,352,000 in the
studio and expects a return on investment (ROI) of 20%.
Budgeted costs for the coming year are as follows.
a. Determine the total cost per session
b. Determine the desired ROI per session
c. Calculate the markup percentage on the total cost per session.
d. Calculate the target price per session.
E8-9
Rey Custom Electronics (RCE) sells and installs complete
security, computer, audio, and video systems for homes. On
newly constructed homes it provides bids using time and
material pricing. The following budgeted cost data are
available.