Question
In: Accounting
Product Cost Method of Product Costing Voice Com, Inc., uses the product cost concept of applying...
Product Cost Method of Product Costing
Voice Com, Inc., uses the product cost concept of applying the cost-plus approach to product pricing. The costs of producing and selling 4,700 units of cell phones are as follows:
| Variable costs: | Fixed costs: | |||||||
| Direct materials | $74 | per unit | Factory overhead | $200,400 | ||||
| Direct labor | 31 | Selling and admin. exp. | 69,000 | |||||
| Factory overhead | 25 | |||||||
| Selling and admin. exp. | 21 | |||||||
| Total variable cost per unit | $151 | per unit | ||||||
Voice Com desires a profit equal to a 14% rate of return on invested assets of $599,500.
a. Determine the amount of desired profit from
the production and sale of 4,700 units of cell phones.
$
b. Determine the product cost per unit for the
production of 4,700 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 |
Solutions
Expert Solution
Total Unit produced is 4700 so multiply all the variable cost per unit with appropriate rate
| Particulars | Per unit $ | Amount in $ |
| Sales (C+B) | 226.17 | $1,063,016 |
| Direct Material | 74 | $347,800 |
| Direct labour | 31 | $145,700 |
| Factory overhead | 25 | $117,500 |
| Selling and Admin cost | 21 | $98,700 |
| Totat Variable cost (B) | 151 | $709,700 |
| Contribution C= (E+D) | $353,316 | |
| Factory Overhead | $200,400 | |
| Selling and Admin exp | $69,000 | |
| Total Fixed Cost (D) | $269,400 | |
| Total Cost (B+D) | 208.32 | $979,100 |
| Desired Profit see working note 1. ( E) | $83,916 |
Working note 1
a)Desired profit is 14% return on invested asset of $599,500 which is = $599,400*14% = $83,916
b) Product Cost per unit will be Total Cost divided by number of units produced. Hence ,
$979,100/4700 = $208.32 product cost per unit.
c) Markup on product cost = Sales price per unit - Product cost per unit = $226.14-$208.32 = 8.55% of markup.
Product cost per unit $208.32
d) Cost per unit = $208.32. Sales price per unit =$226.14. Markup per unit = $17.82 Refer the above table
All the figues are rounded of
Desired Profit formula = Contribution + Fixed Cost
Sales = Contribution + variable cost
Use all the above formulas it will surely help.
ekkarill92 answered 2 years agoRelated Solutions
Product Cost Method of Product Costing Voice Com, Inc., uses the product cost concept of applying...
Product Cost Method of Product Costing
Voice Com, Inc., uses the product cost concept of applying the
cost-plus approach to product pricing. The costs of producing and
selling 4,700 units of cell phones are as follows:
Variable costs:
Fixed costs:
Direct materials
$74
per unit
Factory overhead
$200,400
Direct labor
31
Selling and admin. exp.
69,000
Factory overhead
25
Selling and admin. exp.
21
Total variable cost per unit
$151
per unit
Voice Com desires a profit equal to a...
Product Cost Method of Product Costing Voice Com, Inc., uses the product cost concept of applying...
Product Cost Method of Product Costing
Voice Com, Inc., uses the product cost concept of applying the
cost-plus approach to product pricing. The costs of producing and
selling 4,700 units of cell phones are as follows:
Variable costs:
Fixed costs:
Direct materials
$74
per unit
Factory overhead
$200,400
Direct labor
31
Selling and admin. exp.
69,000
Factory overhead
25
Selling and admin. exp.
21
Total variable cost per unit
$151
per unit
Voice Com desires a profit equal to a...
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Factory overhead
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