Product Cost Method of Product Costing Voice Com, Inc., uses the product cost me

Question

Product Cost Method of Product Costing

Voice Com, Inc., uses the product cost method of applying the cost-plus approach to product pricing. The costs of producing and selling 4,890 units of cell phones are as follows:

Voice Com desires a profit equal to a 16% rate of return on invested assets of $601,600.

a. Determine the amount of desired profit from the production and sale of 4,890 units of cell phones.
$

b. Determine the product cost per unit for the production of 4,890 of cell phones. If required, round your answer to nearest dollar.
$ per unit

c. Determine the product cost markup percentage (rounded to two decimal places) for cell phones.
%

d. Determine the selling price of cell phones. Round to the nearest dollar.

Variable costs: Fixed costs: Direct materials $71 per unit Factory overhead $201,300 Direct labor 40 Selling and admin. exp. 71,600 Factory overhead 25 Selling and admin. exp. 18 Total variable cost per unit $154 per unit

Explanation / Answer

Answer

A..the amount of desired profit from the production and sale of 4,890 units of cell phones:

$601,600*16%

= $96256

B. the product cost per unit for the production of 4,890 of cell phones:

C. The product cost markup percentage:

=Desired Profit / Total Costs

=($96256 / 1025960)*100

=9.38%

D. The selling price of cell phones:

Particulars Amount Variable Cost (4890*$154) $753060 Fixed Cost ($201,300+$71,600) $272900 Total Cost $1025960 Units 4890 units Cost amount per unit (1025960/4890) 210 per unit

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