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Alma’s Recording Studio rents studio time to musicians in 2-hour blocks. Each session includes

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.
                                                                                                            Per Session                  Total Direct materials (tapes, CDs, etc)                                                         $ 20
Direct labor                                                                                          $400
Variable overhead                                                                               $ 50
Fixed overhead                                                                                                                           $950,000

Variable selling and administrative expenses                                       $ 40
Fixed selling and administrative expenses                                                                       $500,000

Instructions
(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.

 
TUTORIAL PREVIEW
Total cost per session:

 
Per Session
Direct materials
$20
Direct labor
400
Variable overhead
50


File name: E8-6 Almas Recording.docx File type: .docx PRICE: 5