Question

Problem Data XYZ Co. uses the product cost concept of applying the cost-plus approach to product...

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 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?

Homework Answers

Answer #1

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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