Mallard Corporation uses the product cost concept of product pricing. Below is c

Question

Mallard Corporation uses the product cost concept of product pricing. Below is cost information for the production and sale of 45,000 of its sole product. Mallard desires a profit equal to a 12% rate of return on invested assets of $800,000. Fixed factory overhead cost $82,000 Fixed selling and administrative costs 45,000 Variable direct materials cost per unit 5.50 Variable direct labor cost per unit 7.65 Variable factory overhead cost per unit 2.25 Variable selling and administrative cost per unit .90 The dollar amount of desired profit from the production and sale of the company's product is:

A.$225,000

B.$220,500

C.$105,840

D.$ 96,000

Using information from Question 1 above, what is the cost per unit for the production of the company's product?

$15.75

Using information from Question 1 above, what is the markup percentage on product cost for the company's product?

10.98$

Using information from Question 1 above, what is the unit selling price for the company's product?

Explanation / Answer

1.D.$96,000.

desired profit = amount of invested assets * return on invested assets.

=>$800,000 * 12%

=>$96,000.

2.B.$17.22.

total product cost = [(direct material +direct labour + variable factory overhead cost)* number of units] + fixed factor overhead cost

=>[$5.50 + $7.65 + $2.25 ] * 45,000 + $82,000

=>$775,000.

product cost per unit = $775,000 / 45,000 units

=>$17.22.

3.C.23.4%.

total mark up = [variable selling and administrative expense + fixed selling and administrative expense + desired profit]

=>[($0.90)*45,000 + $45,000 +$96,000]

=>[($40,500) + $45,000 +$96,000]

=>$181,500.

now,

markup per unit = $181,500 / 45,000

=>$4.03.

markup percentage = makup per unit / unit product cost

=>$4.03 / $17.22 *100

=>23.40%.

4.D.$21.25.

selling price = unit product cost + markup per unit

=>$17.22 + $4.03

=>$21.25.

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