Product Cost Concept of Product Pricing Mademoiselle Company produces women\'s h

ID: 2478984 • Letter: P

Question

Product Cost Concept of Product Pricing

Mademoiselle Company produces women's handbags. The cost of producing 1,290 handbags is as follows:

The selling and administrative expenses are $26,400. The management desires a profit equal to 14% of invested assets of $505,000.

If required, round your answers to nearest whole number.

a. Determine the amount of desired profit from the production and sale of 1,290 handbags.
$

b. Determine the product cost per unit for the production of 1,290 handbags.
$ per unit

c. Determine the product cost markup percentage for handbags.
%

d. Determine the selling price of handbags. Round your answers to nearest whole value.

Direct materials $15,400 Direct labor 8,700 Factory overhead 6,000 Total manufacturing cost $30,100

Solution:

(a) Amount of desired profit from the production and sale of 1,290 handbags = Invested Assets x 14% = $505,000 x 14% = $70,700

(b) Product Cost Per Unit = Total Cost / 1,290 handbags

Total Cost = total manufacturing cost + selling and administrative expenses = $30,100 + $26,400 = $56,500

Product Cost Per Unit = $56,500 / 1,290 = $43.80 Per Unit

(d) Selling Price of handbags:

Cost

$ 43.80 per unit or nearest whole value is

$44 per Unit

Markup ($44 x 125%)

$55 per unit

Selling price (Cost + Markup)

$99 Per Unit