Moon Company uses the variable cost concept of applying the cost-plus approach t

Question

Moon Company uses the variable cost concept of applying the cost-plus approach to product pricing. The costs and expenses of producing and selling 75,000 units of Product T are as follows:

Moon desires a profit equal to a 18% rate of return on invested assets of $1,440,000.

(a) Determine the amount of desired profit from the production and sale of Product T.

$

(b) Determine the total variable costs for the production and sale of 75,000 units of Product T.

$

(c) Determine the markup percentage for Product T. Round to one decimal place.

%

(d) Determine the unit selling price of Product T. Round to two decimal places.

$

Explanation / Answer

Solution:

19.32

a. invested Assets 1,440,000 Return - 18 % on invested Assets - 18 % * 1,440,000 259,200 b. Variable Cost Direct Materials - $ 7 * 75,000 525,000 Direct Labor - $ 3.50 * 75,000 262,500 Factory Overhead - $ 1.50 * 75,000 112,500 Selling Expenses - $ 3 * 75,000 225,000 Total Variable costs 1,125,000 c. Total Variable costs 1,125,000 Total fixed cost 65,000 Total Cost 1,190,000 Return 259,200 Markup = Return / Total Cost * 100 21.8% d. Total Cost 1,190,000 Add: Return 259,200 Total Sales 1,449,200 Units sold 75000 Per unit selling price

19.32

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