MyPhone, Inc., uses the product cost method of applying the cost-plus approach t
ID: 2534672 • Letter: M
Question
MyPhone, Inc., uses the product cost method of applying the cost-plus approach to product pricing. The costs of producing and selling 4,930 units of cell phones are as follows:
MyPhone, Inc., uses the product cost method of applying the cost-plus approach to product pricing. The costs of producing and selling 4,930 units of cell phones are as follows: Variable costs: Fixed costs: $201,900 69,100 Direct materials Direct labor Factory overhead Selling and admin. exp. $77 per unit Factory overhead Selling and admin. exp 38 23 Total variable cost per unit $160 per unit MyPhone desires a profit equal to a 14% rate of return on invested assets of $599,100 a. Determine the amount of desired profit from the production and sale of 4,930 units of cell phones. b. Determine the product cost per unit for the production of 4,930 of cell phones. If required, round your answer to nearest dollan 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. Total Cost Markup Selling price unit r unit r unitExplanation / Answer
Solution a:
Desired profit = $599,100 * 14% = $83,874
Solution b:
Solution c:
Desired profit = $83,874
Selling and administrative expenses = 4930*$23 + $69,100 = $182,490
Desired gross margin = $83,874 + $182,490 = $266,364
Product cost of 4930 units = $877,310
Product cost markup percentage = $266,364 / $877,310 = 30.36%
Solution d:
Total product cost per unit = $178
Markup = $178 * 30.36% = $54
Selling price = $178 + $54 = $232 per unit
Computation of unit product cost Particulars Amount Direct Material (4930*$77) $379,610.00 Direct labor (4930*$38) $187,340.00 Variable factory overhead (4930*$22) $108,460.00 Fixed factory overhead $201,900.00 Total production cost $877,310.00 Nos of units $4,930.00 Product cost per unit $178Related Questions
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