Question

Product Cost Method of Product Costing Voice Com, Inc., uses the product cost method of applying...

Product Cost Method of Product Costing

Voice Com, Inc., uses the product cost method of applying the cost-plus approach to product pricing. The costs of producing and selling 4,750 units of cell phones are as follows:

Variable costs: Fixed costs:
Direct materials $83 per unit Factory overhead $199,100
Direct labor 35 Selling and admin. exp. 68,400
Factory overhead 26
Selling and admin. exp. 22
Total variable cost per unit $166 per unit

Voice Com desires a profit equal to a 14% rate of return on invested assets of $599,900.

a. Determine the amount of desired profit from the production and sale of 4,750 units of cell phones.
$

b. Determine the product cost per unit for the production of 4,750 of cell phones. If required, round your answer to nearest dollar.
$ per unit

c. Determine the product cost markup percentage (rounded to two decimal places) for cell phones.
%

d. Determine the selling price of cell phones. Round to the nearest dollar.

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

Homework Answers

Answer #1
Part-a: Computation of amount of desired Profit
Invested Asset $599,900.00
Rate of Return 14%
Desired Profit (599900*14%) $83,986.00
Computation of product Cost per Unit
Direct Material $83.00
Direct Labour $35.00
Variable factor Overhead $26.00
Fixed Factory Overhead
(199100/4750)
$41.92
Product cost per Unit $185.92
Computation of product cost markup percentage
Variable Sellign & Admin Expense
(22*4750)
$104,500.00
Fixed Selling & Admin Expense 68400
Desired Profit $83,986.00
Total Margin required $256,886.00
Product cost (144*4750)+199100 883100
Margin % (256886/883100) 29.09%
Computation of product Cost per Unit
Total Cost $185.92
Markup (29.09%) $54.08
Selling Price $240.00
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