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6 December, 10:36

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 1,230 sessions. The company has invested $2,337,000 in the studio and expects a return on investment (ROI) of 19%. Budgeted costs for the coming year are as follows. Per Session Total Direct materials (CDs, etc.) $ 19.95 Direct labor $414.00 Variable overhead $ 49.00 Fixed overhead $1,172,190 Variable selling and administrative expenses $ 43.00 Fixed selling and administrative expenses $616,230 Determine the total cost per session. (Round answer to 2 decimal places, e. G. 10.50.)

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  1. 6 December, 10:52
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    a) •Direct Materials = > $19.95

    •Direct Labor=>$414

    •Variable Overhead=>$49

    •Fixed overhead = >$953

    •Variable Selling and Administrative Expenses=>$43

    •Fixed Selling and Administrative Expenses=>$498

    •Total Cost Per Session $1,979.95

    b) $361

    c) 18.23℅

    d) $2340.89

    Explanation:

    a) The total cost per session will be:

    Per Session:

    •Direct Materials = > $19.95

    •Direct Labor=>$414

    •Variable Overhead=>$49

    •Fixed overhead (1,172,190/1230) = >$953

    •Variable Selling and Administrative Expenses=>$43

    •Fixed Selling and Administrative Expenses (616,230/1,230) = >$498

    •Total Cost Per Session $1,979.95

    b) To find desired ROI per session, we use:

    (Investment Amount*ROI Percentage) / Number of Sessions

    = (2,337,000 * 19℅) / 1230

    = $361

    c) The mark-up percentage on total cost per session =

    Desired ROI Per Session/Total Cost Per Session*100

    Using the values from Part a) and b) above, we have:

    Mark-Up Percentage on Total Cost Per Session = (361/1,979.95) * 100 = 18.23%

    d) The target price per session =

    Total Cost Per Session + Total Cost Per Session*Mark-Up Percentage on Total Cost Per Session

    Using the values from a) and c) above, we have:

    Target Price Per Session = 1,979.95 + (1,979.95*18.23%) = $2,340.89
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