Homework Answers
5 Ans). Required Rate of return = 20% on invested assets
i.e, 20% of $1800000 = $ 360,000
Hence , Profit or return per each product = $360000/9000= $ 40 per product.
Hence ,The selling price of the product should be $40 more than the total cost of each product .
Variable cost per product = $ 185 per product
Total variable cost for 9000 units = $ 185 × 9000 units= $ 1665000
Total cost = Total variable cost + fixed overheads + Fixed selling and adminstrative expenses
= 1665000+ 360000+180000
= $2205000.
Hence ,Total cost per product = $2205000/9000= $ 245 per product.
Hence, Selling price of the product should be $245 + $40 = $285.
Few additional considerations which can influence the selling price are;
i) Factory overheads and selling & distribution expenses are both in variable and fixed expenses. Hence, The method of differentiation of the type of expenditure of factory overheads and selling and adminstrative expenses should be analysed .
ii) The selling Price and variable expenses per product has a difference of $ 100 per product .
6 Ans)
a) Till Aug,1,2012 ;5000 units have been sold and 4000 additional units are expected to be sold during the year.
Additionally ,An order for 1500 units have been recieved from Video system Inc. at a price $225 each.
Marginal cost that has to be incurred to produce the extra units of 1500 is $185 per unit - $35 of selling and distribution expenses
= $ 150 per product.
which is less then the order price received and also no additional fixed expenses are required to spend.
b) Though the qoutation received has a price lesser then $285 per product. Display labs should accept the order as the marginal cost for producing the extra units is less then the selling price of the flat tv and also the production of extra units will not impact the present sales of the lab.
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Foduct pricing using the cost-plus approach concepts difta PR 24-SA Product pricing using accepting additional business Display Labs Inc. recently be required the investment of $1,80% units of flat panel displays an Cabs Inc. recently bean production of a new product, flat par is of producing and Variable costs per unit: Direct materials Direct labor Factory overhead Selling and administrative expenses 5 90 Fixed costs: Factory overhead Selling and administrative ex 20 40 Total $185 Display Labs Inc. is currently...
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