Question
In: Accounting
Willis Products Inc. uses the total cost concept of applying the cost-plus approach to product pricing....
Willis Products Inc. uses the total cost concept of applying the cost-plus approach to product pricing. The costs of producing and selling 4,000 units of medical tablets are as follows:
| Variable costs per unit: | Fixed costs: | ||||||
| Direct materials | $99 | Factory overhead | $136,000 | ||||
| Direct labor | 36 | Selling and admin. exp. | 44,000 | ||||
| Factory overhead | 30 | ||||||
| Selling and admin. exp. | 25 | ||||||
| Total | $190 | ||||||
Willis Products desires a profit equal to a 20% rate of return on invested assets of $319,600.
a. Determine the amount of desired profit from
the production and sale of 4,000 units.
$
b. Determine the total costs for the production of 4,000 units.
| Variable | $ |
| Fixed | |
| Total | $ |
Determine the cost amount per unit for the production and sale
of 4,000 units.
$ per unit
c. Determine the total cost markup percentage
per unit. (rounded to one decimal place).
%
d. Determine the selling price per unit. Round
to the nearest cent.
$ per unit
Solutions
Expert Solution
| Part-a Computation of Amount of Desired Profit- Willis Products Inc. | |
| Invested Asset | $319,600.00 |
| Rate of Return | 20% |
| Desired Profit (319600*20%) | $63,920.00 |
| Part-b Computation of Total Cost for the Production of 4000 unit | |
| Variable Cost | |
| Direct material Cost | $396,000.00 |
| Direct lAbour | $144,000.00 |
| Factory Overhead | $120,000.00 |
| Selling & Admin Expnese | $100,000.00 |
| Total Variabel Cost (A) | $760,000.00 |
| Fixed Cost | |
| Factory Overhead | $136,000.00 |
| Selling & Admin Expense | $44,000.00 |
| Total Fixed Cost (B) | $180,000.00 |
| Total Cost for Production of 4000 Unit (A+B) | $940,000.00 |
| Part-c Computation of Total Cost Markup percentage | |
| Cost per Unit (940000/4000) | $235.00 |
| Desired Profit per Unit (63920/4000) | $15.98 |
| Cost Markup percentage (15.98/235) | 6.80% |
| Part-d Computation of SellignPrice per Unit | |
| Cost per Unit (940000/4000) | $235.00 |
| Desired Profit per Unit (63920/4000) | $15.98 |
| Sellign price per Unit | $250.98 |
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