

Problem Data  
XYZ Co. uses the product cost concept of applying the costplus 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.  


Calculations  
1. Compute the product cost and the cost per unit.  
Variable Costs?  enter a formula to compute the answer in yellow cells  
Fixed Costs?  enter data in blue cells  
Total Product Cost?  
Cost per unit?  
2. Compute the amount of desired profit  
____________________________________  
3. Compute the markup percentage  
Desired Profit? 

Total variable selling & admin exp.? 

Total fixed selling & admin exp.?  
÷  
Total Product Cost?  
Markup Percentage?  
4. Compute the normal selling price  
Product Cost per unit? 

Markup percentage?  
Markup per Unit?  
Normal Selling Price? 
1) Compute the product cost and the cost per unit.
Variable cost (215*10000)  2150000 
Fixed cost  350000 
Total product cost  2500000 
Cost per unit (2500000/10000)  250 per unit 
2) Amount of desired profit = 1200000*30% = 360000
3) Compute markup percentage :
Desired profit = 360000
Variable selling and administrative expense = 10000*25 = 250000
Fixed selling and administrative expense = 140000
Total product cost = 2500000
Markup percentage = 750000*100/2500000 = 30%
4) Product cost per unit = 250
Markup percentage = 30%
Markup per unit = 250*30% = 75
Normal selling price = 250+75 = 325
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