Question
In: Accounting
Crystal Displays Inc. recently began production of a new product, flat panel displays, which required the...
Crystal Displays Inc. recently began production of a new product, flat panel displays, which required the investment of $1,300,000 in assets. The costs of producing and selling 5,000 units of flat panel displays are estimated as follows:
|
1 |
Variable costs per unit: |
|
|
2 |
Direct materials |
$119.00 |
|
3 |
Direct labor |
31.00 |
|
4 |
Factory overhead |
49.00 |
|
5 |
Selling and administrative expenses |
36.00 |
|
6 |
Total variable cost per unit |
$235.00 |
|
7 |
Fixed costs: |
|
|
8 |
Factory overhead |
$248,000.00 |
|
9 |
Selling and administrative expenses |
150,000.00 |
Crystal Displays Inc. is currently considering establishing a selling price for flat panel displays. The president of Crystal Displays has decided to use the cost-plus approach to product pricing and has indicated that the displays must earn a 12% return on invested assets.
| Required: | |||||||
| 1. | Determine the amount of desired profit from the production and sale of flat panel displays. | ||||||
| 2. | Assuming that the product cost method is used, determine (a) the cost amount per unit, (b) the markup percentage, and (c) the selling price of flat panel displays.* | ||||||
| 3. | (Appendix) Assuming that the total cost method is used, determine (a) the cost amount per unit, (b) the markup percentage and (c) the selling price of flat panel displays.* | ||||||
| 4. | (Appendix) Assuming that the variable cost method is used, determine (a) the cost amount per unit, (b) the markup percentage, and (c) the selling price of flat panel displays.* | ||||||
| 5. | Comment on any additional considerations that could influence establishing the selling price for flat panel displays. | ||||||
| 6. | Assume that as of August 1,
3,000 units of flat panel displays have been produced and sold
during the current year. Analysis of the domestic market indicates
that 2,000 additional units are expected to be sold during the
remainder of the year at the normal product price determined under
the product cost method. On August 3, Crystal Displays Inc.
received an offer from Maple Leaf Visual Inc. for 1,000 units of
flat panel displays at $223 each. Maple Leaf Visual Inc. will
market the units in Canada under its own brand name, and no
variable selling and administrative expenses associated with the
sale will be incurred by Crystal Displays Inc. The additional
business is not expected to affect the domestic sales of flat panel
displays, and the additional units could be produced using existing
factory, selling, and administrative capacity.
|
Solutions
Expert Solution
| Ques 1 | |
| desired profit | $ 156,000 |
| 1300000*0.12 | |
| Ques 2 | |
| a) | |
| Variable cost | $ 199.00 |
| 235-36 | |
| Fixed OH Cost per unit | $ 49.60 |
| 248000/5000 | |
| Cost per unit | $ 248.60 |
| Profit per unit | $ 31.20 |
| 156000/5000 | |
| b) | |
| Markup percentage | 12.55% |
| 31.2/248.6 | |
| c)Selling price | $ 345.80 |
| (because the mgmt uses cost plus approach | |
| see ques 3 part c) | |
| Ques 3 | |
| a) | |
| Variable cost | $ 235.00 |
| Fixed OH Cost per unit | $ 79.60 |
| (248000+150000)/5000 | |
| Cost per unit | $ 314.60 |
| Profit per unit | $ 31.20 |
| 156000/5000 | |
| b) | |
| Markup percentage | 9.92% |
| 31.2/314.6 | |
| c)Selling price | $ 345.80 |
| 314.6+31.2 | |
| Ques 4 | |
| Variable cost | $ 235.00 |
| b) | |
| Markup percentage | 13.28% |
| 31.2/235 | |
| c)Selling price | $ 345.80 |
| (because the mgmt uses cost plus approach | |
| see ques 3 part c) | |
| Ques 5 | |
| a.
Prices being offered by competitors b. Life Cycle of the product. |
|
| Ques 6 | |
| part a | |
| Incremental sales | $ 223,000 |
| 1000*223 | |
| Less: | |
| Varaible product cost | $ 199,000 |
| 199*1000 | |
| Incremental profit | $ 24,000 |
| part b | |
| yes accepted due to incremental profit | |
ekkarill92 answered 2 years agoRelated Solutions
Crystal Displays Inc. recently began production of a new product, flat panel displays, which required the...
Crystal Displays Inc. recently began production of a new
product, flat panel displays, which required the investment of
$1,600,000 in assets. The costs of producing and selling 5,000
units of flat panel displays are estimated as follows: 1 Variable
costs per unit: 2 Direct materials $122.00 3 Direct labor 32.00 4
Factory overhead 48.00 5 Selling and administrative expenses 34.00
6 Total variable cost per unit $236.00 7 Fixed costs: 8 Factory
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Crystal Displays Inc. recently began production of a new product, flat panel displays, which required the...
Crystal Displays Inc. recently began production of a new
product, flat panel displays, which required the investment of
$1,300,000 in assets. The costs of producing and selling 5,000
units of flat panel displays are estimated as follows:
1
Variable costs per unit:
2
Direct materials
$120.00
3
Direct labor
32.00
4
Factory overhead
48.00
5
Selling and administrative expenses
36.00
6
Total variable cost per unit
$236.00
7
Fixed costs:
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Factory overhead
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Selling and administrative expenses
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Crystal Displays Inc. recently began production of a new product, flat panel displays, which required the...
Crystal Displays Inc. recently began production of a new
product, flat panel displays, which required the investment of
$1,300,000 in assets. The costs of producing and selling 5,000
units of flat panel displays are estimated as follows:
1
Variable costs per unit:
2
Direct materials
$120.00
3
Direct labor
32.00
4
Factory overhead
48.00
5
Selling and administrative expenses
36.00
6
Total variable cost per unit
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Fixed costs:
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Factory overhead
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Selling and administrative expenses
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Crystal Displays Inc. recently began production of a new product, flat panel displays, which required the...
Crystal Displays Inc. recently began production of a new
product, flat panel displays, which required the investment of
$1,600,000 in assets. The costs of producing and selling 5,000
units of flat panel displays are estimated as follows:
1
Variable costs per unit:
2
Direct materials
$118.00
3
Direct labor
30.00
4
Factory overhead
50.00
5
Selling and administrative expenses
34.00
6
Total variable cost per unit
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Fixed costs:
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Factory overhead
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Selling and administrative expenses
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Crystal Displays Inc. recently began production of a new product, flat panel displays, which required the...
Crystal Displays Inc. recently began production of a new
product, flat panel displays, which required the investment of
$1,500,000 in assets. The costs of producing and selling 5,000
units of flat panel displays are estimated as follows:
1
Variable costs per unit:
2
Direct materials
$119.00
3
Direct labor
32.00
4
Factory overhead
52.00
5
Selling and administrative expenses
36.00
6
Total variable cost per unit
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Fixed costs:
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Factory overhead
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Selling and administrative expenses
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Crystal Displays Inc. recently began production of a new product, flat panel displays, which required the...
Crystal Displays Inc. recently began production of a new
product, flat panel displays, which required the investment of
$1,500,000 in assets. The costs of producing and selling 5,000
units of flat panel displays are estimated as follows:
1
Variable costs per unit:
2
Direct materials
$122.00
3
Direct labor
29.00
4
Factory overhead
52.00
5
Selling and administrative expenses
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6
Total variable cost per unit
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Factory overhead
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