Question

magpie corporation uses the total concept of product pricing. below is the cost information for the...

magpie corporation uses the total concept of product pricing. below is the cost information for the production and sale of 60,000 units it it's sole product. magpie desires a profit equal to a 25% rate of return on invested assets of 700,000
fixed factory overhead costs 38,700
fixed selling and administrative costs 7500
variable direct materials costs per unit 4.60
variable direct labor cost per unit 1.88
variable factory overhead cost per unit 1.13
variable selling and administrative cost per unit 4.50
the unit selling price for the company's product is
a. 15.00
b. 13.82
c. 15.79
d. 14.76

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Answer #1
Ans. Option c $15.79
*Calculation:
Unit Selling Price   = Total sales / Sales units
947800 / 60000
15.79 per unit
*Total sales:
Sales     =     Total variable cost + Total fixed cost + Profit
726600 + 46200 + 175000
947800
*Total variable cost      =    Total variable cost per unit * Sales units
(4.60+1.88+1.13+4.50) * 60000
726600
*Total Fixed cost          =    Factory overhead cost + Selling & administration cost
38700 + 7500
46200
*Profit   = Invested assets * 25%
700000 * 25%
175000
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