magpie corporation uses the total concept of product pricing. below is the cost

Question

magpie corporation uses the total concept of product pricing. below is the cost information for the production and sale of 60,000 units it it's sole product. magpie desires a profit equal to a 25% rate of return on invested assets of 700,000
fixed factory overhead costs 38,700
fixed selling and administrative costs 7500
variable direct materials costs per unit 4.60
variable direct labor cost per unit 1.88
variable factory overhead cost per unit 1.13
variable selling and administrative cost per unit 4.50
the unit selling price for the company's product is
a. 15.00
b. 13.82
c. 15.79
d. 14.76

Explanation / Answer

Ans. Option c $15.79 *Calculation: Unit Selling Price   = Total sales / Sales units 947800 / 60000 15.79 per unit *Total sales: Sales     =     Total variable cost + Total fixed cost + Profit 726600 + 46200 + 175000 947800 *Total variable cost      =    Total variable cost per unit * Sales units (4.60+1.88+1.13+4.50) * 60000 726600 *Total Fixed cost          =    Factory overhead cost + Selling & administration cost 38700 + 7500 46200 *Profit   = Invested assets * 25% 700000 * 25% 175000

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