Quick Connect manufactures high-tech cell phones. Quick Connect has a policy of

Question

Quick Connect manufactures high-tech cell phones. Quick Connect has a policy of adding a 15% markup to full costs and currently has excess capacity. The following information pertains to the company's normal operations per month:   

                Output units                                                                             1,500 phones

                Machine-hours                                                                           1,100 hours

                Direct manufacturing labor-hours                                       1,200 hours

                Direct materials per unit                                                          $24

                Direct manufacturing labor per hour                                     $9

                Variable manufacturing overhead costs             $213,000

                Fixed manufacturing overhead costs                        $127,000

                Product and process design costs                              $143,700

                Marketing and distribution costs                               $154,345

For long-run pricing of the cell phones, what price will most likely be used by Quick Connect?

A) $188.50

B) $31.20

C) $186.70

D) $173.20

Explanation / Answer

direct materials = 24

direct labor = 1200 *9/1500 = 7.2

variable overhead = 213000/1500 = 142

fixed overheads = 127000/1500 = 84.67

product and design costs = 143700/1500 = 95.8

marketing and distribution costs = 154345/1500 = 102.90

total costs = 456.57

markup @20% = 456.57 * 20% = 91.31

price in long run = 456.57 + 91.31 = 547.88

none of the options are correct

Related Questions

Navigate

• Browse (All)
• Browse Q
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.