Pricing a Service E4A. Iowa has just passed a law making it mandatory to have every chicken…

Pricing a Service E4A. 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: Direct service labor                                         $275,000 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. 2. Using gross margin pricing, determine the price to charge for inspecting each chicken. 3. Using return on assets pricing, compute the unit price to charge for this inspection service. (Round to two decimal places.)

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