Dotterel Corporation uses the variable cost concept of producing pricing. Blelow
ID: 2443968 • Letter: D
Question
Dotterel Corporation uses the variable cost concept of producing pricing. Blelow is cost information for the production and sale of 35,000 units of its sole product. Dotterel desires a profit equal to a 11.2% rate of return on invested assests of $350,000.Fixed factory overhead cost 105,000
fixed selling and administrative costs 35,000
variable direct materials cost per unit 4.35
variable direct labor cost per unit 5.18
variable factory overhead cost per unit .98
variable selling and administrative cost per unit .70
the dollar amount of desired profit from the production and sales of the company product is?
The variable cost per unit for the production and sale of the company's prouct is?
the markup percentage for the sale of the company's product is?
the unit selling price for the company's product is?
Explanation / Answer
The dollar amount of desired profit from the production and sales of the company product is
Desired Profit = 11.2% of 350,000 = $39,200
The variable cost per unit for the production and sale of the company's prouct is
= variable direct materials cost per unit+ variable direct labor cost per unit+ variable factory overhead cost per unit+ variable selling and administrative cost per unit
=4.35+5.18+0.98+0.70
=$11.21
The markup percentage for the sale of the company's product is:
Total Cost = 11.21*35000+105000+35000
= 532350
Desired Profit = 39200
Therefore, Mark-up % = 39200/532350*100 = 7.36% on cost
Or 39200/571550*100 = 6.86% on Sales
The unit selling price for the company's product is:
Total Cost = 532350
Desired Profit = 39200
Sales = 571550
No. Of Units = 35000
Therefore, Unit Selling Price = 571550/35000 = $16.33
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