Magpie Corporation uses the total cost concept of product pricing. Below is the

Question

Magpie Corporation uses the total cost concept of product pricing. Below is the cost information for the production and sale of 62,600 units of its sole product. Magpie desires a profit equal to a 20% rate of return on invested assets of $630,000.

Fixed factory overhead cost $35,400

Fixed selling and administrative costs 7,900

Variable direct materials cost per unit 4.74

Variable direct labor cost per unit 1.88

Variable factory overhead cost per unit 1.13

Variable selling and administrative cost per unit 4.50

The cost per unit for the production and sale of the company's product is

a. $1.82

b. $0.69

c. $12.25

d. $12.94

Explanation / Answer

Answer d. $12.94

Explanation :

Cost per unit ($) Variable direct materials cost 4.74 Variable direct labor cost 1.88 Variable factory overhead cost 1.13 Variable selling and administrative cost 4.50 Fixed factory overhead cost ($35,400 / 62,600) 0.56 Fixed selling and administrative costs ($7,900 / 62,600) 0.13 Cost per unit for the production and sale $12.94

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