a. | Variable cost per unit = $144 per unit | |||
Total Fixed cost = Factory overhead + selling and admin expense | ||||
Total Fixed cost = $235,700 + 82,800 = $318,500 | ||||
Fixed cost per unit = $318,500 / 6,500 units | ||||
Fixed cost per unit = $49 per unit | ||||
Product cost per unit = Variable cost per unit + Fixed cost per unit | ||||
Product cost per unit = $144 + $49 = $193 per unit | ||||
Total cost = 6,500 units*$193 = $1,254,500 | ||||
b | Desired Return = Rate of return*Invested assets | |||
Desired Return = 15% of $702,520 = $105,378 | ||||
Product cost markup = Desired profit / Total cost | ||||
Product cost markup = $105,378 / 1,254,500 | ||||
Product cost markup = 8.40% | ||||
c | Selling price of cellular phone = Product cost per unit(1+product cost markup %) | |||
Selling price of cellular phone = $193(1.0840) | ||||
Selling price of cellular phone = $209.212 per phone | ||||
Total Cost Method of Product Pricing Smart Stream Inc. uses the total cost method of applying...
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