La Femme Accessories Inc. produces women\'s handbags. The cost of producing 800

Question

La Femme Accessories Inc. produces women's handbags. The cost of producing 800 handbags is as follows:

The selling and administrative expenses are $17,000. The management desires a profit equal to 22% of invested assets of $250,000.

a. Determine the amount of desired profit from the production and sale of 800 handbags.
$

b. Determine the product cost per unit for the production of 800 handbags. Round your answer to two decimal places.
$

c. Determine the product cost markup percentage for handbags.
%

d. Determine the selling price of handbags. Round your answers to two decimal places, if necessary.

Direct materials $18,000 Direct labor 8,500 Factory overhead 5,500 Total manufacturing cost $32,000

Explanation / Answer

Part A)

The desired value of profit can be calculated with the use of following formula:

Desired Profit = Value of Invested Assets*Desired Profit Percentage

__________

Using the information provided in the question, we get,

Desired Profit = 250,000*22% = $55,000

__________

Part B)

The product cost per unit is calculated with the use of following table:

__________

Part C)

The markup percentage can be calculated with the use of following formula:

Markup Percentage = (Desired Profit + Selling and Administrative Expenses)/Total Manufacturing Costs*100

__________

Using the values calculated above and information provided in the question, we get,

Markup Percentage = (55,000 + 17,000)/32,000*100 = 225%

__________

Part D)

The selling price of handbags is calculated with the use of following table:

Direct Materials 18,000 Direct Labor 8,500 Factory Overhead 5,500 Total Production Cost (A) 32,000 Total Number of Handbags (B) 800 Product Cost Per Unit (A/B) $40

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