Product Cost Method of Product Costing Voice Com, Inc., uses the product cost me
ID: 2432992 • Letter: P
Question
Product Cost Method of Product Costing
Voice Com, Inc., uses the product cost method of applying the cost-plus approach to product pricing. The costs of producing and selling 5,030 units of cell phones are as follows:
Voice Com desires a profit equal to a 16% rate of return on invested assets of $601,600.
a. Determine the amount of desired profit from the production and sale of 5,030 units of cell phones.
$
b. Determine the product cost per unit for the production of 5,030 of cell phones. If required, round your answer to nearest dollar.
$ per unit
c. Determine the product cost markup percentage (rounded to two decimal places) for cell phones.
%
d. Determine the selling price of cell phones. Round to the nearest dollar.
Variable costs: Fixed costs: Direct materials $88 per unit Factory overhead $201,800 Direct labor 35 Selling and admin. exp. 71,500 Factory overhead 26 Selling and admin. exp. 19 Total variable cost per unit $168 per unitExplanation / Answer
a.
Desired profit = Invested assets * Rate of return on invested assets
= 601,600 * 16%
= 96,256
b.
Total fixed costs per unit = (Factory overhead + Selling and administrative exp.) / 5,030 units
= (201,800+71,500) / 5,030
= 54.33
Product cost per unit = Total varaible cost per unit + Total fixed cost per unit
= 168 + 54.33
= 222.33
c.
Markup percentage = Desired profit / Total costs
= 96,256 / [(168*5,030) + 201,800 + 71,500]
= 96,256 / 1,118,340
= 8.61%
d.
Total cost 222.33 Markup 19.14 (222.33*8.61%) Selling price 241.47Related Questions
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