Question

# Product Cost Concept of Product Pricing Willis Products Inc. uses the product cost concept of applying...

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 assets of \$252,000.

a. Determine the total manufacturing costs for the production and sale of 3,000 units.

 Total Manufacturing Costs Variable \$ Fixed factory overhead Total \$

Determine the cost amount per unit for the production and sale of 3,000 units.
\$ per unit

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

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

 Total Manufacturing cost: Material (3000 units @114) 342000 Labour (3000*42) 126000 Overheads (3000*35) 105000 Total Variable cost 573000 Total Fixed manufacturing cost 120000 Total Manufacturing cost: 693000 Total Markup requirred: Selling and admin expense Variable (3000*29) 87000 Fixed 39000 Total Selling and admin expense 126000 Target income 50400 (\$ 252000*20%) Total Markup requirred: 176400 Total Manufacturing cost 693000 % of Markup on Product cost 25.45% (\$ 176400*/693000 *100) Total Manufacturing cost 693000 Add: markup @25.45% 176400 Total sales required 869400 Divide; Number of units 3000 Sselling price per unitt 289.8

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