Product Cost Method of Product Costing product cost method of applying the cost-

Question

Product Cost Method of Product Costing product cost method of applying the cost-plus approach to product pricing. The costs of producing and selting 10,000 cell phones are as follows: Variable costs per unit Fixed costs Direct materials Direct labor Factory overhead 150 Factory overhead $350,000 Selling and administrative expenses 25 40 25 140,000 expenses Total variable cost per unit $240 ?) Snart Stream desires a profit equal to a 30% return on invested assets of Si,200,000. a. Determine the amount of desired profit from the production and sale of 10,000 cell phones. 360,000 b. Determine the product eost per unit for the predution of 10,000 units of cell phones. ?.Determine the product cost markup percentage fo, cel phones. d. Determine the seling price of cell phones. Round to the nearest dollar Total Cost oer unt Seling price 325 per unit a. Muitiply the desired prote percentage by the desired amount Cinvested assets) b. Divide tre totai manufacturing (veriable and fixed) costs by the number ef unts produced. Divide the desired profit plus the total seling and administrative expenses by the total

Explanation / Answer

Req a: Invested Assets: $1,200,000 Desired return 30% Desired return in $ 360,000 (1200,000*30%) Req b: UNIT PRODUCT COST: Material 150 Llabourr 25 Variable Manufacturing OH 40 Fixed manufacturing OH (350,000/10,000) 35 Unit Product cost: 250 Req c: Prduct Cost Markup percentage: Product cost per unit 250 Profit margin per unit (360,000/10,000) 36 % markup on Product cost (36/250*100) 14.40% Req D: Unit Product cost 250 Add: Selling expense Variable 25 Fixed (140,000/10,000) 14 Total Cost 289 Add: markup (250*14.40%) 36 Selling price 325

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