Question

Smart Stream Inc. uses the total cost method of applying the cost-plus approach to product pricing. The costs of producing and selling 9,000 units of cell phones are as follows: Variable costs: Fixed costs: Direct materials $ 71 per unit Factory overhead $319,700 Direct labor 33 Selling and administrative expenses 112,300 Factory overhead 21 Selling and administrative expenses 17 Total variable cost per unit $142 per unit Smart Stream desires a profit equal to a 15% return on invested assets of $1,003,200. a. Determine the total cost and the total cost amount per unit for the production and sale of 9,000 units of cellular phones. Round the cost per unit to two decimal places. Total cost $ Total cost amount per unit $ b. Determine the total cost markup percentage (rounded to two decimal places) for cellular phones. % c. Determine the selling price of cellular phones. Round to the nearest cent. $ per cellular phone

Answer 1

a
Direct materials	639000	=9000*71
Direct labor	297000	=9000*33
Factory overhead	508700	=319700+(9000*21)
Selling and administrative expenses	265300	=112300+(9000*17)
Total cost	1710000
Divide by units	9000
Total cost amount per unit	190.00
b
Required return	150480	=1003200*15%
Divide by Total cost	1710000
Total cost markup percentage	8.80%
c
Total cost amount per unit	190.00
Add: Markup	16.72	=190*8.8%
Selling price of cellular phone	206.72	per cellular phone