1. Determine the amount of desired profit from the production and sale of flat p
ID: 2582240 • Letter: 1
Question
1. Determine the amount of desired profit from the production and sale of flat panel displays.
2. Assuming that the product cost concept is used, determine (a) the cost amount per unit, (b) the markup percentage (rounded to two decimal places), and (c) the selling price of flat panel displays.
3. (Appendix) Assuming that the total cost concept is used,determine (a) the cost amount per unit, (b) the markup percentage (rounded to two decimal places), and (c) the selling price of flat panel displays.
4. (Appendix) Assuming that the variable cost concept is used, determine (a) the cost amount per unit, (b) the markup percentage (rounded to two decimal places), and (c) the selling price of flat panel displays.
5. Comment on any additional considerations that could influence establishing the selling price for flat panel displays.
The cost-plus approach price of $360_should/should not____ be viewed as a general guideline for establishing long-run normal prices. Other considerations, such as the price of competing products and general economic conditions of the marketplace, __(could/will)______ lead management to establish a short-run price more or less than $360.
1 Variable costs per unit: 2 Direct materials $121.00 3 Direct labor 28.00 4 Factory overhead 49.00 5 Selling and administrative expenses 37.00 6 Total $235.00 7 Fixed costs: 8 Factory overhead $254,000.00 9 Selling and administrative expenses 147,000.00Explanation / Answer
1) Desired profit for CD Inc.: = Desired profit percentage * Invested assets = 12%*1,300,000 =$156,000 2) a) Total product cost per unit: Particulars Total cost Variable cost (5000*198) 990000 Fixed cost 254000 Total product cost 1244000 Product cost per unit = Total product cost/No. of units produced = $1,224,000/5,000 = $248.8 b) Cost markup % = (Desired profit + total selling and Admi.Exp.)/Total product cost = (156,000+185,000+147,000)/1,244,000 =39.23% c) Selling price of flat panel display: Particulars Cost No. of flat panel displays Price per flat panel displays Direct materials 121 5000 605000 Direct labour 28 5000 140000 Variable factory overhead 49 5000 245000 Fixed factory overhead 0 0 254000 Total product cost ($1,244,000/5,000) $ 248.80 Markup 39.23% $ 97.60 Selling price per unit $ 346.40 3)a) Total cost per unit: Particulars Total cost Variable cost (5000*235) 1175000 Fixed factory overheads 254000 Fixed selling and Adim. Exp. 147000 Total product cost 1576000 Cost per unit = Total cost/No. of units produced = 1,576,000/5,000 =$315.20 b) Cost markup % = (Desired profit)/Total cost = 156,000/1,576,000 = 9.90% c) Particulars Cost No. of flat panel displays Price per flat panel displays Direct materials 121 5000 605000 Direct labour 28 5000 140000 Variable factory overhead 49 5000 245000 Variable selling and dist. Exp. 37 5000 185000 Fixed factory overhead 254000 Fixed selling and Adim. Exp. 147000 Total product cost ($1,576,000/5,000) $ 315.20 Markup 9.90% $ 31.20 Selling price per unit $ 346.40 4)a) Particulars Total cost Direct materials 121 Direct labour 28 Factory overhead 49 Selling and Admi. Exp. 37 Total variable cost per unit $ 235.00 b) Cost markup % = (Desired profit+Fixed cost)/Total variable cost = (156,000+254,000+147,000)/1,175,000 =47.40% c) Particulars Total cost Direct materials 121 Direct labour 28 Variable Factory overhead 49 Variable Selling and Admi. Exp. 37 Total variable cost per unit $ 235.00 Markup 47.40% $ 111.39 Selling price per unit $ 346.39
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