Power-To-Spare, Inc. makes a smartphone case that includes a battery that extend

Question

Power-To-Spare, Inc. makes a smartphone case that includes a battery that extends the operating life of an iPhone. The manufacturing costs per unit include $15 direct materials, $17 direct labor and $8 manufacturing overhead. These costs are based on a production and sales volume of 4,000 units. Advertising costs amounted to $25,000. Research and development cost for the materials used in the phone cases amounted $30,000. Companywide administrative costs amounted to $45,000. Fashion design costs amounted to $20,000. Power-To-Spare’s management team established the sales price at 150 percent of GAAP-defined product cost.

Would someone please tell me what the sale price is? I have everything else, but cannot solve the price. I came up with 100, 130, & 175, none of which were right.

Explanation / Answer

Mainly cost for direct materials, direct labor and manufacturing overhead is allowed according to GAAP.
Then cost per unit = 15+17+8 = 40

Power-To-Spare’s management team established the sales price at 150 percent of GAAP-defined product cost.
Then required selling price per unit = 40* 150% = 40*1.50 = $60.

Note:

Some reference say that "Indirect materials used in production" is also allowed so if we consider Research and development cost and Fashion design costs in indirect material cost then
total cost of 4000 units is given by
4000(15+17+8)+30000+20000 = 210000
cost per unit = 210000/4000 = 52.5
Then required selling price per unit = 52.5* 150% = 52.5*1.50 = $78.75.

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