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

Question

Product Cost Concept of Product Pricing Mademoiselle Company produces women's handbags. The cost of producing 1,150 handbags is as follows Direct materials Direct labor Factory overhead Total manufacturing cost The selling and administrative expenses are $26,900. The management desires a profit equal to 15% of invested assets of $504,000 If required, round your answers to nearest whole number a. Determine the amount of desired profit from the production and sale of 1,150 handbags $14,800 7,700 5,700 $28,200 b. Determine the product cost per unit for the production of 1,150 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. Cost Markup Selling price per unit per unit per unit

Explanation / Answer

Mademoiselle Company

Desired profit = 15% on invested assets

Invested assets = $504,000

Desired profit = 15% x 504,000 = $75,600

Product cost per unit = total manufacturing cost/number of handbags

Total manufacturing cost = $28,200

Number of handbags = 1,150

Product cost per unit = 28,200/1,150 = $24.52

Markup percentage = (desired profit + selling and administrative expenses)/total product cost

Desired profit = $75,600

Selling and administrative expenses = $26,900

Total product cost = $28,200

Markup percentage = (75,600 + 26,900)/28,200 = 363%

Cost per unit = $24.52

Markup = 363% x $24.52 = $89 per unit

Selling price = $113.65 or $114 per unit

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