Question

1. Product Cost Concept of Product Costing

   Voice Com, Inc., uses the product cost concept of applying the cost-plus approach to product pricing. The costs of producing and selling 4,640 units of cellular phones are as follows:

   Variable costs:						Fixed costs:
   	Direct materials		$69	per unit			Factory overhead	$201,500
   	Direct labor		40				Selling and admin. exp.	68,500
   	Factory overhead		26
   	Selling and admin. exp.		21
   		Total	$156	per unit

   Voice Com desires a profit equal to a 14% rate of return on invested assets of $598,600.

   a. Determine the amount of desired profit from the production and sale of 4,640 units of cellular phones.
   $

   b. Determine the cost amount per unit for the production of 4,640 units of cellular phones. If required, round your answer to nearest dollar.
   $ per unit

   c. Determine the product cost markup percentage (rounded to two decimal places) for cellular phones.
   %

   d. Determine the selling price of cellular phones. Round to the nearest dollar.

   Cost	$per unit
   Markup	$per unit
   Selling price	$per unit

Answer 1

a)The calculation of the amount of desired profit from the production and sale of 4,640 units of cellular phones is shown below:

Desired Profit =$598,600.*14%

= $83,804

b)The calculation of the cost amount per unit for the production of 4,640 units of cellular phones is shown below:;

Product Cost Per Unit = Direct material cost per unit + Direct labor cost per unit + variable factory overhead cost per unit + fixed factory overhead cost per unit

= $69 + $40 + $26 + ($201,500/4,640 units)

= $69 + $40 + $26 + $43.23

= $178.43

3)the calculation of the product cost markup percentage for cellular phones is shown below:

Total cost per unit= product cost + variable selling and admin expense per unit + Fixed selling and admin. expense per unit

= $178.43 + $21 + ($68,500/4,640 units)

= $178.43 + $21 + $14.76

= $214.20

selling price per unit= Total cost per unit+ desire profit

= $214.20 + ($83,804/4,640 units)

= $214,19 + $18.06

= $232.25

Product cost mark-up percentage = (selling price per unit - Product Cost Per Unit)/selling price per unit

= ($232.25 - $$178.43)/$232.25

=23.17%

The calculation of selling price is shown below:

selling price per unit= Total cost per unit+ desire profit(Markup)

= $214.20 + ($83,804/4,640 units)

= $214,19 + $18.06

= $232.25