Question
In: Accounting
Willis Products Inc. uses the product cost concept of applying the cost-plus approach to product pricing....
Willis Products Inc. uses the product cost concept of applying the cost-plus approach to product pricing. The costs of producing and selling 2,000 units of medical tablets are as follows:
| Variable costs per unit: | Fixed costs: | ||||||
| Direct materials | $83 | Factory overhead | $58,000 | ||||
| Direct labor | 30 | Selling and admin. exp. | 20,000 | ||||
| Factory overhead | 26 | ||||||
| Selling and admin. exp. | 21 | ||||||
| Total | $160 | ||||||
Willis Products desires a profit equal to a 25% rate of return on invested assets of $116,560.
a. Determine the total manufacturing costs for the production and sale of 2,000 units.
| Total Manufacturing Costs | |
| Variable | $ |
| Fixed factory overhead | |
| Total | $ |
Determine the cost amount per unit for the production and sale
of 2,000 units.
$ per unit
b. Determine the product cost markup percentage
per unit. Round your percentage answer to one decimal place.
%
c. Determine the selling price per unit. Use
the rounded product cost markup percentage in your calculations,
and round the amount of the markup to the nearest whole
dollar.
$ per unit
Solutions
Expert Solution
a. Determine the total manufacturing costs for the production and sale of 2,000 units.
| Total Manufacturing Costs | |
| Variable [($83 +$30 +$26) × 2,000 units] | $278,000 |
| Fixed factory overhead | $58,000 |
| Total | $336,000 |
Cost per unit for production and sale:
= Total Manufacturing Cost 
No. of units produced
= $336,000
2,000 units
= $168
____________________________________________________________
b. Determine the product cost markup percentage per unit.
Markup Percentage = [Selling Expense + Desired Profit]
Total Manufacturing Cost
= ([$21 
2,000 units) + $20,000] + [Invested Assets
ROI]
Total Manufacturing Cost
= $62,000 + [$116,560
25%]
$336,000
= [$62,000 + $29,140]
$336,000
= 27.125%
_____________________________________________________________
c. Determine the selling price per unit.
Selling price = Product Cost + markup
= $168 + [$168
27.125%]
= $168 + $45.57
= $213.57
ekkarill92 answered 2 years agoRelated Solutions
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