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Horngren, Datar and Rajan Chapter 13: Astel Computers Provalue cost-plus price
| Tool | Job Quote Builder |
| Source | Horngren, C. T., Datar, S. M., and Rajan, M. V. (2015). Cost Accounting: A Managerial Emphasis, 15th ed. Pearson, Boston. Chapter 13, Astel Computers Provalue. |
| Level | Undergraduate |
Problem
Astel's Provalue computer has a full cost of 720 per unit. The company wants an 18 % return on its 96,000,000 of invested capital over 200,000 units, which it expresses as a markup on full cost. Find the markup percentage, the prospective selling price and the margin on price, and compare with the target price of 800 that yields a 10 % operating income.
Inputs to Enter
- Example select: Horngren, Astel Provalue cost-plus price
- Full cost per unit 720 (one material line), markup on cost 12 %, quantity 1; no overhead, G&A, commission or discount
Answers
- Target return 0.18 × 96,000,000 / 200,000 = 86.40 per unit = 12 % of 720
- Prospective price 720 + 86.40 = 806.40; margin on price 86.40 / 806.40 = 10.71 %
- Target price 800 gives operating income 80, 10 % of the price (target cost 720); the margin mode at 10 % returns the 800
Notes
Choose the Astel entry in the example select. The arithmetic is consistent with the text; the page itself was not found online.