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Product Cost Method of Product Pricing La Femme Accessories Inc. produces women's handbags. The cost of...

  1. Product Cost Method of Product Pricing

    La Femme Accessories Inc. produces women's handbags. The cost of producing 1,300 handbags is as follows:

    Direct materials $14,800
    Direct labor 7,000
    Factory overhead 6,200
    Total manufacturing cost $28,000

    The selling and administrative expenses are $28,000. The management desires a profit equal to 15% of invested assets of $504,000.

    If required, round your answers to nearest whole number.

    a. Determine the amount of desired profit from the production and sale of 1,300 handbags.
    $

    b. Determine the product cost per unit for the production of 1,300 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

Homework Answers

Answer #1
a. Desired profit = Desired profit rate * Invested assets = 15% * 504000 75600
b. Product cost per unit = Total manufacturing cost / Units produced = 28000 / 1300 22 per unit
c. Product cost markup percentage = ( Desired profit + Selling and administrative expenses ) / Total manufacturing cost = ( 75600 + 28000 ) / 28000 370%
d. Cost 22 Per unit
Markup ( 22 * 370% ) 81 Per unit
Selling price 103 Per unit i
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