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.
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

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. 
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

Quizplus · Accepted Answer

To calculate the price using a desired return on life cycle costs of 30%, we need to use the formula:

Price = Total Cost / (1 - Desired Return)

From the table, we can see that the Total Cost for the coming year is $400,000.

Therefore, Price = $400,000 / (1 - 0.30) = $400,000 / 0.70 = $571,428.57

However, this price is for the entire life cycle of the product. If we assume a life cycle of 6 years, then the price for one year would be:

Price per year = $571,428.57 / 6 = $95,238.10

This price per year includes all costs (direct and indirect) and the desired return of 30%.

Therefore, the answer is D) $364.29 (rounded to the nearest cent), which is the price for one unit of the product.

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