Voice Com, Inc., uses the product cost method of applying the cost-plus approach to product pricing. The costs of producing and selling 4,530 units of cell phones are as follows:
Variable costs: | Fixed costs: | |||||||
Direct materials | $62 | per unit | Factory overhead | $199,900 | ||||
Direct labor | 40 | Selling and admin. exp. | 71,500 | |||||
Factory overhead | 26 | |||||||
Selling and admin. exp. | 23 | |||||||
Total variable cost per unit | $151 | per unit |
Voice Com desires a profit equal to a 15% rate of return on invested assets of $599,900.
a. Determine the amount of desired profit from
the production and sale of 4,530 units of cell phones.
$
b. Determine the product cost per unit for the
production of 4,530 of cell phones. If required, round your answer
to nearest dollar.
$ per unit
c. Determine the product cost markup percentage
(rounded to two decimal places) for cell phones.
%
d. Determine the selling price of cell phones. Round to the nearest dollar.
Total Cost | $per unit |
Markup | per unit |
Selling price | $per unit |
Check My Work
a. | Desired profit = Desired profit rate * Invested assets = 15% * 599900 | 89985 |
b. | Direct materials ( 62 * 4530 ) | 280860 | |
Direct labor ( 40 * 4530 ) | 181200 | ||
Variable Factory overhead ( 26 * 4530 ) | 117780 | ||
Fixed factory overhead | 199900 | ||
Total manufacturing cost | 779740 | ||
(/) Number of units | 4530 | ||
Product cost per unit | 172 | per unit |
c. | Variable selling and admin. Exp. ( 4530 * 23 ) | 104190 |
Fixed selling and admin. Exp. | 71500 | |
Total selling and admin. Exp. | 175690 |
Product cost markup percentage = ( Desired profit + Total Selling and administrative expenses ) / Total manufacturing cost = ( 89985 + 175690 ) / 779740 | 34.07% |
d. | Total cost | 172 | Per unit |
Markup ( 172 * 34.07% ) | 59 | Per unit | |
Selling price | 231 | Per unit |
Voice Com, Inc., uses the product cost method of applying the cost-plus approach to product pricing....
Voice Com, Inc., uses the product cost method of applying the cost-plus approach to product pricing. The costs of producing and selling 4,530 units of cell phones are as follows: Variable costs: Fixed costs: Direct materials $62 per unit Factory overhead $199,900 Direct labor 40 Selling and admin. exp. 71,500 Factory overhead 26 Selling and admin. exp. 23 Total variable cost per unit $151 per unit Voice Com desires a profit equal to a 15% rate of return on invested...
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