EX 25-18 Product cost concept of product costing Smart Stream Inc. uses the prod
ID: 2583722 • Letter: E
Question
EX 25-18 Product cost concept of product costing Smart Stream Inc. uses the product cost concept of applying the cost-plus approach to product pricing. The costs of producing and selling 10,000 cellular phones are as follows: OBJ. 2 Variable costs per unit: Fixed costs $150Factory overhead Direct materials Direct labor Factory overhead Selling and administrative expenses 25 $350,000 Selling and administrative expenses 140,000 25 40 Total $240 Smart Stream, wants a profit equal to a 30% rate of return on invested assets of $1,200,000. a. Determine the amount of desired profit from the production and sale of 10,000 cel- lular phones. b. Determine the product cost and the cost amount per unit for the production of 10,000 cellular phones. c. Determine the product cost markup percentage for cellular phones. d. Determine the selling price of cellular phones.Explanation / Answer
Desired Profit = 30% of $1,200,000= $360,000
variable cost per unit
Direct material $150
Direct Labor $25
Factory Overhead $40
Selling & Admn Exp $25
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Total variable cost per unit $240
Sales Volume 10,000 Units
Variable cost $2,400,000
Fxed Cost
Factoy overhead $350,000
Selling & Adn Exp $140,000
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Total Fixed Cost $490,000
Total Cost (Variable+Fixed)= $2,400,000+ $490,000=$2,890,000
Add: Desired Profit $360,000
___________
Required Sales amount $3,250,000 for 10,000 Units
Selling Price Per Unit $325
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