Jay Company uses the total cost concept of applying the cost-plus approach to pr
ID: 2471795 • Letter: J
Question
Jay Company uses the total cost concept of applying the cost-plus approach to product pricing. The costs and expenses of producing and selling 38,400 units of Product E are as follows:
Jay desires a profit equal to a 14% rate of return on invested assets of $640,000.
(a) Determine the amount of desired profit from the production and sale of Product E: $
(b) Determine the total costs and the cost amount per unit for the production and sale of 38,400 units of Product E:
Total costs: $
Cost amount per unit: (Round to two decimal places.) $
(c) Determine the markup percentage for Product E: (Round to one decimal place.) %
(d) Determine the selling price of Product E: (Round to two decimal places.) $
Variable costs: Direct materials $4.70 Direct labor 2.50 Factory overhead 1.90 Selling and administrative expenses 2.60 Total $11.70 Fixed costs: Factory overhead $80,000 Selling and administrative expenses 14,000Explanation / Answer
Variable costs:
Direct materials
$4.70
Direct labor
2.50
Factory overhead
1.90
Selling and administrative expenses
2.60
Total
$11.70
Fixed costs:
Factory overhead
$80,000
Selling and administrative expenses
14,000
Number of units =38400
a. Amount of profit from production and sale
Variable cost =11.70
Fixed cost per unit=94000/38400=2.44
Total cost per unit=11.70+2.44=14.14
Mark up required =16%
Price after including mark up =1.6 *14.14=22.624
Price=22.62
Profit per unit=22.624-14.14=8.48
Total profit=8.48*38400=325632
b.Cost per unit=14.14
Total cost=14.14*38400=542976
c.Mark up %=16
d.Selling price =Cost + Mark up=14.14 + .16*14.14=22.63
Variable costs:
Direct materials
$4.70
Direct labor
2.50
Factory overhead
1.90
Selling and administrative expenses
2.60
Total
$11.70
Fixed costs:
Factory overhead
$80,000
Selling and administrative expenses
14,000
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