Magpie Corporation uses the total cost concept of product pricing. Below is cost

Question

Magpie Corporation uses the total cost concept of product pricing. Below is cost information for the production and sale of 60,000 units of its sole product. Magpie desires a profit equal to a 25% rate of return on invested assets of $700,000.

Fixed factory overhead cost $38,700
Fixed selling and administrative costs 7,500
Variable direct materials cost per unit 4.60
Variable direct labor cost per unit 1.88
Variable factory overhead cost per unit 1.13
Variable selling and administrative cost per unit 4.50

The cost per unit for the production and sale of the company's product is:
a. $12.11
b. $15
c. $12.88
d. $13.50

Explanation / Answer

Magpie Corporation uses the total cost concept of product pricing. Below is cost information for the production and sale of 60,000 units of its sole product. Magpie desires a profit equal to a 25% rate of return on invested assets of $700,000. Fixed factory overhead cost $38,700 Fixed selling and administrative costs 7,500 Variable direct materials cost per unit 4.60 Variable direct labor cost per unit 1.88 Variable factory overhead cost per unit 1.13 Variable selling and administrative cost per unit 4.50 The cost per unit for the production and sale of the company's product is: b. $15

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