The selling and administrative expenses are $28,000. The management desires a pr

Question

The selling and administrative expenses are $28,000. The management desires a profit equal to 16% of invested assets of $500,000.

a. Determine the amount of desired profit from the production and sale of 1,200 handbags.
$

b. Determine the product cost per unit for the production of 1,200 handbags.
$

c. Determine the product cost markup percentage for handbags.

???

Determine the selling price of handbags.

Cost: $ per unit Markup: per unit Selling price: $ per unit Mademoiselle Company produces women's handbags. The cost of producing 1,200 handbags is as follows:The selling and administrative expenses are $28,000. The management desires a profit equal to 16% of invested assets of $500,000. Determine the amount of desired profit from the production and sale of 1,200 handbags.$ Determine the product cost per unit for the production of 1,200 handbags. $Determine the product cost markup percentage for handbags.??? Determine the selling price of handbags.

Explanation / Answer

HI,

Please find the answers as follows:

Part A:

Amount of desired profit = 16%*500000 = 80000

Part B:

Total Product Cost = 16000 (Direct Material) + 8000 (Direct Labor) + 6000 (Manufacturing Overhead) = 30000

Product Cost Per Unit = 30000/1200= 25 per unit

Part C:

Let the selling price be X

Profit = Selling Price - Cost

80000 = X*1200 - 25*1200 - 28000 =

X = 115

Selling Price = Product Cost*(1+Markup)

115 = 25*(1+Markp Up)

Mark Up = (115 /25)- 1 = 360%

Part D:

Selling Price = 115 (calculated above)

Thanks.

Cost: 25 Markup: 90 Selling price: 115

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