MyPhone, Inc., uses the product cost concept of applying the cost-plus approach
ID: 2571261 • Letter: M
Question
MyPhone, Inc., uses the product cost concept of applying the cost-plus approach to product pricing. The costs of producing and selling 5,360 units of cellular phones are as follows:
MyPhone desires a profit equal to a 14% rate of return on invested assets of $598,400.
a. Determine the amount of desired profit from the production and sale of 5,360 units of cellular phones.
$
b. Determine the cost amount per unit for the production of 5,360 units of cellular phones. If required, round your answer to nearest dollar.
$ per unit
c. Determine the product cost markup percentage (rounded to two decimal places) for cellular phones.
%
d. Determine the selling price of cellular phones. Round to the nearest dollar.
Check My Work
Variable costs: Fixed costs: Direct materials $88 per unit Factory overhead $198,900 Direct labor 34 Selling and admin. exp. 71,100 Factory overhead 28 Selling and admin. exp. 21 Total $171 per unitExplanation / Answer
A. The desired profit is 14% of $ 598,400 which comes to 14 * 100 / 598,400 = $83,776.
B. Cost per unit will the variable cost per unit of 5360 units which is given as $171 plus fixed cost
= 5360 * 171 + 198,900 + 71,100 = 916,560 + 198900 + 71100 = $1,186,560 (Total cost)
Per Unit cost = 1186560 / 5360 = $221 Per unit
C. Product cost markup percentage is desired profit * 100 / Total cost
= 83776 * 100 / 1186560 = 7.06%
D. Selling price will be per unit total cost plus the amount equal to markup percentage of cost
= 221 + 7.06% of 221 = 221 + 15.60 = 236.60 or $237 Approx.
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