Voice Com, Inc., uses the product cost concept of applying the cost-plus approac
ID: 2581796 • Letter: V
Question
Voice Com, Inc., uses the product cost concept of applying the cost-plus approach to product pricing. The costs of producing and selling 5,070 units of cell phones are as follows:
Voice Com desires a profit equal to a 14% rate of return on invested assets of $598,500.
a. Determine the amount of desired profit from the production and sale of 5,070 units of cell phones.
$
b. Determine the product cost per unit for the production of 5,070 of cell phones. If required, round your answer to nearest dollar.
$ 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.
Cost: $____per unit
Markup $____per unit
Selling price $_____per unit
Variable costs: Fixed costs: Direct materials $89 per unit Factory overhead $198,300 Direct labor 33 Selling and admin. exp. 71,800 Factory overhead 27 Selling and admin. exp. 22 Total variable cost per unit $171 per unitExplanation / Answer
a) Desired Profit = Assets * return
= 598500 * 14%
= 83790
b) Calculating the total cost
Variable cost per unit = 171 per unit
Fixed Cost per unit = (Fixed overhead cost + selling and admin cost) / Total units
= (198300+71800) / 5070
= 53.27
Total cost per unit = variable cost per unit + fixed cost per unit
= 171 + 53.27
= 224.27
c) Markup percentage = Desired profit / Total cost
= 83790 / (171*5070 + 198300+71800)
= 7.37%
d) Cost per unit = 224.27
Markup = 7.37
Selling price = Cost * 1+markup
= 224.27*1.0737
= 240.80
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