Johnson Marine has the following costs and expected sales for the coming year. Johnson is considering a number of different methods to determine the price of its product.$\begin{array}{lr}&\text { Total Costs }\
\text { Variable Manufacturing } & \$ 2,350,000 \
\text { Variable Selling and Administrative } & 750,000 \
\text { Plant-level Fixed Overhead } & 1,200,000 \
\text { Fixed Selling and Administrative } & 600,000 \
\text { Batch-level Fixed Overhead } & 200,000 \
\text { Total Investment in Product Line } & 10,000,000 \
\text { Expected Sales (units) } & 20,000
\end{array}$If Johnson determines price using a desired return on life cycle costs of 30%, the price is:
A) $262.50
B) $306.00
C) $375.00
D) $364.29
E) $330.00

Question

Quizplus · Accepted Answer

To calculate the price using a desired return on life cycle costs of 30%, first, we need to determine the total life cycle costs and then add the desired return. Total life cycle costs include variable manufacturing costs, variable selling and administrative costs, plant-level fixed overhead, fixed selling and administrative costs, and batch-level fixed overhead. Total life cycle costs = $2,350,000 (Variable Manufacturing) + $750,000 (Variable Selling and Administrative) + $1,200,000 (Plant-level Fixed Overhead) + $600,000 (Fixed Selling and Administrative) + $200,000 (Batch-level Fixed Overhead) = $5,100,000. Desired return = 30% of $5,100,000 = $1,530,000. Total costs including desired return = $5,100,000 + $1,530,000 = $6,630,000. To find the price per unit, divide the total costs including desired return by the expected sales (units): $6,630,000 / 20,000 units = $331.50. However, since this option is not available, it seems there was a mistake in my calculation. Correcting the approach: Total costs = $5,100,000. Desired return on total investment = 30% of $10,000,000 = $3,000,000. Therefore, total costs including desired return = $5,100,000 + $3,000,000 = $8,100,000. Price per unit = $8,100,000 / 20,000 units = $405. This indicates a mistake in the calculation or understanding of the question as provided options do not match the recalculated outcome. The correct approach involves adding the desired return on the total investment or costs correctly and dividing by the expected sales to find the price per unit, considering all provided data.

Johnson Marine Has the Following Costs and Expected Sales for the Coming