Question

Product Cost Concept of Product Pricing La Femme Accessories Inc. produces women's handbags. The cost of producing 800 handbags is as follows: Direct materials $18,000 Direct labor 8,500 Factory overhead 5,500 Total manufacturing cost $32,000 The selling and administrative expenses are $17,000. The management desires a profit equal to 22% of invested assets of $250,000. a. Determine the amount of desired profit from the production and sale of 800 handbags. $ 55,000 b. Determine the product cost per unit for the production of 800 handbags. Round your answer to two decimal places. $ 40 c. Determine the product cost markup percentage for handbags. 171.875 X % d. Determine the selling price of handbags. Round your answers to two decimal places, if necessary. Cost $ 40 per unit Markup $ 68.75 X per unit 108.75 x per unit Selling price $ Feedback Check My Work a. Multiply the desired profit percentage by the desired amount (invested assets)

Answer 1

C D S 55,000 B 1 a) 2 Particulars Amount 3 Invested Assets $ 2,50,000 4 Desired profit Percentage 22% 5 Desired profit 6 b) 7 Computation of product cost per unit for 800 bags 8 Particulars Amount 9 Total manufacturing cost $ 32,000 10 No. of bags produced 800 11 Production cost per unit $ 40 12 c) 13 Mark up percentage on product 14 Particulars Amount 15 Desired profit $ 55,000 16 Total selling and Administrative Expenses $ 17,000 17 Total product cost $ 32,000 18 Mark up percentage on product (Desired profit-total selling and 19 Administrative Expenses) Total product cost

20 d) 21 Particulars 22 Product cost 23 Mark up cost 24 Selling price per hand bag 25 Cost $ $ 32,000 72,000 No.of bags Price per bag 800 $ 40 800 $ $ 130 90

Amount 250000 0.22 =+B3*B4 A i a) 2 Particulars 3 Invested Assets 4 Desired profit Percentage 5 Desired profit 6 b) 7 Computation of product cost per unit for 800 bags 8 Particulars 9 Total manufacturing cost 10 No. of bags produced 11 Production cost per unit 12 c) 13 Mark up percentage on product 14 Particulars 15 Desired profit 16 Total selling and Administrative Expenses 17 Total product cost 18 Mark up percentage on product Amount 32000 800 =+B9/B10 Amount 55000 17000 32000 19 (Desired profit-total selling and Administrative Expenses)/Total product cost 2.25

No.of bags 20 d) 21 Particulars 22 Product cost 23 Mark up cost 24 Selling price per hand bag Cost 32000 72000 800 Price per bag =+B22/C22 =+B23/C23 =SUM(D22:D23) 800 25