The following is to be done using the \"Variable Cost Concept\": Variable costs
ID: 2541034 • Letter: T
Question
The following is to be done using the "Variable Cost Concept":
Variable costs per unit: Fixed costs: Direct materials Direct labor Factory overhead Selling and admin. exp $109 40 34 27 $210 Factory overhead 304,000 Selling and admin.exp 104,000 Total Willis Products desires a profit equal to a 25% rate of return on invested assets of $767,040 a. Determine the variable costs and the cost amount per unit for the production and sale of 8,000 units of medical tablets. Total variable costs Variable cost per unit b. Determine the variable cost markup percentage per unit. Round your percentage answer to one decimal place. per unit c. Determine the selling price per unit dollar. Use the rounded variable cost markup percentage in your calculations, and round the amount of the markup to the nearest whole per unitExplanation / Answer
a.
Total variable costs
= Variable cost per unit (given) x Number of units produced and sold
= $210 x 8,000
= $1,680,000
Variable cost per unit = $210 (given)
b.
Invested assets = $767,040
Required rate of return = 25%
Total desired profit = Invested assets x required rate of return = $767,040 x 25% = $191,760
Sales required to generate profit of $191,760
= Total variable costs + Total fixed costs + Desired profit
= $1,680,000 + ($304,000 + $104,000) + $191,760
= $2,279,760
Therefore,
Variable cost markup percentage per unit
= (Sales - Total variable costs)/Total variable costs
= ($2,279,760 - $1,680,000)/$1,680,000
= 35.7%
c.
Selling price per unit = Variable cost per unit x (1 + Markup percentage) = $210 x (1 + 0.357) = $285
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