Question

La Femme Accessories Inc. produces women's handbags. The cost of producing 1,200 handbags is as follows:...

La Femme Accessories Inc. produces women's handbags. The cost of producing 1,200 handbags is as follows:

Direct materials $16,700
Direct labor 7,200
Factory overhead 6,000
Total manufacturing cost $29,900

The selling and administrative expenses are $26,800. The management wants a profit equal to 17% of invested assets of $502,000.

If required, round your answers to nearest whole number.

a. Determine the amount of desired profit from the production and sale of 1,200 handbags. If required, round your answers to nearest whole number.
$

b. Determine the product cost per unit for the production of 1,200 handbags.
$per unit

c. Determine the product cost markup percentage for handbags.
%

d. Determine the selling price of handbags. Round your answers to nearest whole value.

Cost $ per unit
Markup per unit
Selling price $ per unit

2.

ower Serve Company expects to operate at 85% of productive capacity during July. The total manufacturing costs for July for the production of 28,900 batteries are budgeted as follows:

Direct materials $365,500
Direct labor 134,400
Variable factory overhead 37,640
Fixed factory overhead 75,000
Total manufacturing costs $612,540

The company has an opportunity to submit a bid for 2,000 batteries to be delivered by July 31 to a government agency. If the contract is obtained, it is anticipated that the additional activity will not interfere with normal production during July or increase the selling or administrative expenses.

What is the unit cost below which Power Serve Company should not go in bidding on the government contract? Round your answer to two decimal places.
$ per unit

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Homework Answers

Answer #1

a. Determine the amount of desired profit from the production and sale of 1,200 handbags. If required, round your answers to nearest whole number.
$502000*17% = 85340

b. Determine the product cost per unit for the production of 1,200 handbags.
$29900/1200 = 25 per unit

c. Determine the product cost markup percentage for handbags.
(26800+85340)/29900 = 375%

d. Determine the selling price of handbags. Round your answers to nearest whole value.

Cost $25 per unit
Markup 25*3.75 = 94 per unit
Selling price $25+94 = 119 per unit

2) Calculate minimum price

Direct material 365500
Direct labor 134400
Variable factory overhead 37640
Total relevant cost 537540
Unit 28900
Unit cost 18.60

unit cost below which Power Serve Company should not go in bidding on the government contract = $18.60

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