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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.
$ 83930

b. Determine the product cost per unit for the production of 4,700 of cell phones. If required, round your answer to nearest dollar.
$ 173 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 $173 per unit
Markup $per unit
Selling price $per unit

Solutions

Expert Solution

1 the amount of desired profit from the production and sale of 4,700 units of cell phones.
DesiredProfit= Cost of ivetsed asset*4%
=599500*.14
=$83930
Desired Profit p.u = $83930/4700
                                       17.86
2 Total Cost
Total VariableCost p.u                                                       151.00
FxedCost p.u                                                         14.68 (200400+69000)/4700uniits
                                                      165.68
Cost per unit = $166 p.u
3 Determine the product cost markup percentage (rounded to two decimal places) for cell phones
$ p.u
Cost per unit = $166
Desired Profit = $17.86
Mark up on Cost = Profit/Cost 10.76%
(17.86/166*100)
4 Determine the selling price of cell phones.
Cost per unit = $166
Desired Profit = $17.86
Estimated Selling Price $183.86

ekkarill92 answered 2 years ago
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