Rachel's Recording Studio rents studio time to musicians in 2-hour blocks. Each session includes the use of the studio facilities, a digital recorded tape of the performance, and a professional music producer/mixer. Anticipated annual volume is 1,000 sessions. The company has invested $2,058,000 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
Determine the total cost per session.
Determine the desired ROI per session. (Round answer to 2 decimal places, e.g. 10.50.)
Calculate the mark-up percentage on the total cost per session. (Round answer to 0 decimal places, e.g. 10%. Use the rounded amounts from the previous questions when calculating the answer for this question.)
Calculate the target price per session. (Round answer to 2 decimal places, e.g. 10.50. Use the rounded amounts from the previous questions when calculating the answer for this question.)
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