Question

Variable Cost Concept of Product Pricing

Willis Products Inc. uses the product cost concept of applying the cost-plus approach to product pricing. The costs of producing and selling 7,000 units of medical tablets are as follows:

Variable costs per unit: | Fixed costs: | ||||||

Direct materials | $109 | Factory overhead | $266,000 | ||||

Direct labor | 40 | Selling and admin. exp. | 91,000 | ||||

Factory overhead | 34 | ||||||

Selling and admin. exp. | 27 | ||||||

Total | $210 |

Willis Products desires a profit equal to a 25% rate of return on invested assets of $600,012.

**a.** Determine the variable costs and the cost
amount per unit for the production and sale of 7,000 units of
medical tablets.

Total variable costs | $ |

Variable cost per unit | $ per unit |

**b.** Determine the variable cost markup
percentage per unit. Round your percentage answer to one decimal
place.

%

**c.** Determine the selling price per unit. Use
the rounded variable cost markup percentage in your calculations,
and round the amount of the markup to the nearest whole
dollar.

$ per unit

For part b I keep doing the calculations and keep getting 10.2% which the system is telling me is incorrect.

For part C I keep doing the calculations and keep getting 231 which the system is also telling me is incorrect.

Answer #1

a. Total variable costs = $210 x 7000 = $1470000

Variable cost per unit = $210 per unit

b. Variable cost markup percentage per unit: 34.5%

Markup percentage = (Desired profit + Total fixed costs)/Total variable costs

Desired profit = $600012 x 25% = $150003

Total fixed costs = $266000 + $91000 = $357000

Total variable costs = $1470000

Markup percentage = ($150003 + $357000)/$1470000 = $507003/$1470000 = 34.49% = 34.5%

c. Selling price per unit: $282

Variable cost per unit = $210

Markup per unit = $210 x 34.5% = $72.45 = $72

Selling price per unit = $210 + $72 = $282

Product Cost Concept of Product Pricing
Willis Products Inc. uses the product cost concept of applying
the cost-plus approach to product pricing. The costs of producing
and selling 3,000 units of medical tablets are as follows:
Variable costs per unit:
Fixed costs:
Direct materials
$114
Factory overhead
$120,000
Direct labor
42
Selling and admin. exp.
39,000
Factory overhead
35
Selling and admin. exp.
29
Total
$220
Willis Products desires a profit equal to a 20% rate of return
on invested...

Product Cost Concept of Product Pricing
Willis Products Inc. uses the product cost concept of applying
the cost-plus approach to product pricing. The costs of producing
and selling 3,000 units of medical tablets are as follows:
Variable costs per unit:
Fixed costs:
Direct materials
$114
Factory overhead
$120,000
Direct labor
42
Selling and admin. exp.
39,000
Factory overhead
35
Selling and admin. exp.
29
Total
$220
Willis Products desires a profit equal to a 20% rate of return
on invested...

Problem Data
XYZ Co. uses the product cost
concept of applying the cost-plus approach to product pricing. The
costs of producing and selling 10,000 units are as follows:
XYZ desires profit equal to a
30% rate of return on invested assets of $1,200,000.
Variable Costs per unit:
Fixed costs:
Direct materials
$
150
Factory Overhead
$ 350,000
Direct labor
25
Selling & admin. expense
$ 140,000
Factory overhead
40
Selling & Admin expense
25
Total
$
240
Calculations
1. Compute...

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Variable costs:
Fixed costs:
Direct materials
$ 95
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Factory overhead
$235,500
Direct labor
44
Selling and admin. exp.
82,750
Factory overhead
29
Selling and admin. exp.
22
Total
$190
per unit
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Fixed costs:
Direct materials
$150
Factory overhead
$350,000
Direct labor
25
Selling and admin. exp.
140,000
Factory overhead
40
Selling and administrative expenses
25
Total variable cost per unit
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Smart Stream desires a profit equal to a 30% return on invested...

1.
Smart Stream Inc. uses the total cost concept of applying the
cost-plus approach to product pricing. The costs of producing and
selling 8,000 units of cellular phones are as follows:
Variable costs:
Fixed costs:
Direct materials
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per unit
Factory overhead
$349,300
Direct labor
40
Selling and admin. exp.
122,700
Factory overhead
26
Selling and admin. exp.
21
Total
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Smart Stream wants a profit equal to a 15% rate of return on
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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
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Factory overhead
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Direct labor
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Selling and admin. exp.
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Factory overhead
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Selling and admin. exp.
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Total variable cost per unit
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cost-plus approach to product pricing. The costs of producing and
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Direct materials
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Factory overhead
$201,300
Direct labor
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Selling and admin. exp.
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Factory overhead
25
Selling and admin. exp.
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Total variable cost per unit
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Voice Com desires a profit equal to a...

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Direct materials
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Factory overhead
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Direct labor
30
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70,800
Factory overhead
26
Selling and admin. exp.
20
Total variable cost per unit
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Voice Com desires a
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Smart Stream Inc. produces and sells cell phones. The costs of
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Variable costs:
Fixed costs:
Direct materials
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per unit
Factory overhead
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Direct labor
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Selling and admin. exp.
49,700
Factory overhead
21
Selling and admin. exp.
17
Total variable cost per unit
$140
per unit
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on invested...

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