Iowa has just passed a law making it mandatory to have every
chicken inspected at least once a year for a variety of
communicable diseases. Cluck Enterprises is considering entering
this inspection business. After extensive studies, Cluck’s owner
has developed the following annual projections:

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Direct service labor 5,000

Variable service overhead costs 25,000

Fixed service overhead costs 200,000

Selling expenses 100,500

General and administrative expenses 59,500

Minimum desired profit 100,000

Cost of assets employed 800,000

The owner believes his company could inspect 2,000,000 chickens
per year. On average, the company now earns a 6 percent return on
assets.

1. Compute the projected cost of inspecting
each chicken. Round your answer to the nearest cent.
$    per chicken

2. Determine the price to charge for inspecting
each chicken. Use gross margin pricing. Round your answer to the
nearest cent.
$    per chicken

3. Using return on assets pricing, compute the
unit price to charge for this inspection service. Round your answer
to the nearest cent.
$    per chicken

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