Question

Please show work

Product Cost Method of Product Costing

MyPhone, Inc., uses the product cost method of applying the cost-plus approach to product pricing. The costs of producing and selling 5,190 units of cell phones are as follows:

Variable costs:						Fixed costs:
	Direct materials		$64	per unit			Factory overhead	$200,900
	Direct labor		39				Selling and admin. exp.	70,600
	Factory overhead		28
	Selling and admin. exp.		18
		Total variable cost per unit	$149	per unit

MyPhone desires a profit equal to a 15% rate of return on invested assets of $598,200.

a. Determine the amount of desired profit from the production and sale of 5,190 units of cell phones.
$__________

b. Determine the product cost per unit for the production of 5,190 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

Answer 1

Solution a:

Amount of desired profit from the production and sale of 5,190 units of cell phones = $598,200* 15% = $89,730

Solution b:

Product cost per unit for the production of 5,190 of cell phones = Variable production cost + Fixd factory overhead

= ($64 + $39 + $28) + ($200,900 / 5190) = $170 per unit

Solution c:

Required mark up per unit to cover selling expense and profit = $18 + ($70,600 / 5190) + ($89,730 / 5190)

= $48.89 per unit

Product cost markup percentage = $48.89 / $170 = 28.76%

Solution d:

Total cost = $170 per unit

Markup per unit = $48.89 per unit

Selling price = $218.89 per unit