MyPhone, Inc. uses the product cost method of applying the cost-plus approach to product pricing. The costs of producing and selling 5,380 cell phones are as follows:
| Variable costs per unit: | Fixed costs: | |||||||
| Direct materials | $64 | Factory overhead | $198,000 | |||||
| Direct labor | 31 | Selling and administrative expenses | 71,300 | |||||
| Factory overhead | 23 | |||||||
| Selling and administrative expenses | 21 | |||||||
| Total variable cost per unit | $139 | |||||||
MyPhone desires a profit equal to a 16% rate of return on invested assets of $600,700.
a. Determine the amount of desired profit from
the production and sale of 5,380 cell phones.
$
b. Determine the product cost per unit for the
production of 5,380 of cell phones. Round your answer to the
nearest whole dollar.
$ per unit
c. Determine the product cost markup percentage
for cell phones. Round your answer to two decimal places.
%
d. Determine the selling price of cell phones. Round your answers to the nearest whole dollar.
| Total Cost | $per unit |
| Markup | per unit |
| Selling price | $per unit |
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(All answers were generated using 1,000 trials and native Excel functionality.)
The management of Brinkley Corporation is interested in using simulation to estimate the profit per unit for a new product. The selling price for the product will be $45 per unit. Probability distributions for the purchase cost, the labor cost, and the transportation cost are estimated as follows:
| Procurement Cost ($) |
Probability |
Labor Cost ($) |
Probability |
Transportation Cost ($) |
Probability |
| 10 | 0.25 | 20 | 0.10 | 3 | 0.75 |
| 11 | 0.45 | 22 | 0.25 | 5 | 0.25 |
| 12 | 0.30 | 24 | 0.35 | ||
| 25 |
0.30 |
| (a) | Construct a simulation model to estimate the average profit per unit. What is a 95% confidence interval around this average? |
| Round your answers to two decimal places. | |
| Lower Bound: $ | |
| Upper Bound: $ |
| (b) | Management believes that the project may not be sustainable if the profit per unit is less than $5. Use simulation to estimate the probability that the profit per unit will be less than $5. What is a 95% confidence interval around this proportion? |
| Round your answers to one decimal of a percentage. | |
| Lower Bound: % | |
| Upper Bound: % |
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