Silco Pty Ltd manufactures various lines of computer equipment.They are planning to introduce a line of laptop computers in January 2008.Current plans call for the production and sale of 1000 computers with estimated production costs as follows.The average amount of capital invested in the laptop computer line is $900 000 and Silco's target return on investment for the line is 18 per cent.What price must Silco charge if the company uses cost-plus pricing based on full cost?

Question

Quizplus · Accepted Answer

To determine the price using cost-plus pricing based on full cost, we need to add the production costs per laptop to the markup percentage.

Production cost per laptop = Total production costs / Number of laptops produced
Production cost per laptop = ($900,000 / 1000) = $900

Markup percentage = Target return on investment / Total cost
Markup percentage = 18% / 100% = 0.18

Price per laptop = Production cost per laptop + (Markup percentage x Production cost per laptop)
Price per laptop = $900 + (0.18 x $900)
Price per laptop = $1,062

Therefore, the price Silco must charge to achieve a target return on investment of 18% is $1,062. The closest answer choice is C ($1,192), which is the best option.

Silco Pty Ltd Manufactures Various Lines of Computer Equipment