Question
In: Accounting
Total Cost Concept of Product Costing Willis Products Inc. uses the total cost concept of applying...
Total Cost Concept of Product Costing
Willis Products Inc. uses the total cost concept of applying the cost-plus approach to product pricing. The costs of producing and selling 5,000 units of medical tablets are as follows:
| Variable costs per unit: | Fixed costs: | ||||||
| Direct materials | $120 | Factory overhead | $205,000 | ||||
| Direct labor | 44 | Selling and admin. exp. | 70,000 | ||||
| Factory overhead | 37 | ||||||
| Selling and admin. exp. | 29 | ||||||
| Total | $230 | ||||||
Willis Products desires a profit equal to a 20% rate of return on invested assets of $733,875.
a. Determine the amount of desired profit from
the production and sale of 5,000 units.
$ 146,775
b. Determine the total costs for the production of 5,000 units.
| Variable | $ 1,150,000 |
| Fixed (Need help) | |
| Total | $ (Need help) |
Determine the cost amount per unit for the production and sale
of 5,000 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
- All working forms part of the answer
- Requirement ‘a’
|
A |
Invested Assets |
$ 7,33,875.00 |
|
B |
Desired Profit/return % |
20% |
|
C=A x B |
Desired Profit/return |
$ 1,46,775.00 |
- Requirement ‘b’
|
A |
Variable cost per unit |
$ 230.00 |
|
B |
Total Units |
5000 |
|
C = A x B |
Total variable cost |
$ 11,50,000.00 |
|
D |
Total Fixed cost [205000 + 70000] |
$ 2,75,000.00 |
|
E = C + D |
Total Cost |
$ 14,25,000.00 |
|
F = E/B |
Total cost per unit |
$ 285.00 |
- Requirement ‘c’
|
A |
Desired Profit/return |
$ 1,46,775.00 |
|
B |
Total Unit |
5000 |
|
C=A/B |
Profit per unit |
$ 29.36 |
|
D |
Total cost per unit |
$ 285.00 |
|
E=C/D |
Total cost markup % per unit |
10.3% |
- Requirement ‘d’
|
A |
Total cost per unit |
$ 285.00 |
|
B |
Total cost markup % per unit |
10.3% |
|
C=A x B |
Markup (profit) |
$ 29.36 |
|
D = A + C |
Selling Price per unit |
$ 314.36 |
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