Product Cost Method of Product Pricing La Femme Accessories Inc. produces women\

Question

Product Cost Method of Product Pricing La Femme Accessories Inc. produces women's handbags. The cost of producing 1,130 handbags is as follows: Direct materials Direct labor Factory overhead Total manufacturing cost The selling and administrative expenses are S26,600. The management desires a profit equal to 14% of invested assets of S435.000. If required, round your answers to nearest whole number. a. Determine the amount of desired profit from the production and sale of 1,130 handbags. $15,700 9,000 6,400 $31,100 b. Determine the product cost per unit for the production of 1,130 handbags. per unit c. Determine the product cost markup percentage for handbags. d. Determine the selling price of handbags. Round your answers to nearest whole value Cost Markup Selling price per unit per unit per unit

Explanation / Answer

a) Desired Profit = 14% of 495000 = $69300

b) Calculation of product cost per unit :

Total manufacturing cost = $31100

Selling & Administrative expenses = $26600

Total cost = $31100+426600=$57700

Product cost per unit = $57500/ 1130=$51.06 or $52 (after rounding off)

(c) Mark up percentage = Profit/ cost *100 = 69300/57700*100 = 120%

d) Sales = Total cost + Desired profit = $57700+$69300 = $127000

Cost per unit = $57700/1130= $52

Mark up per unit = $69300/1130 = $62

Selling price per unit = $127000/1130 = $112

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