Product Cost Method of Product Costing Voice Com Inc uses th

Product Cost Method of Product Costing

Voice Com, Inc., uses the product cost concept of applying the cost-plus approach to product pricing. The costs of producing and selling 4,700 units of cell phones are as follows:

Voice Com desires a profit equal to a 14% rate of return on invested assets of $599,500.

a. Determine the amount of desired profit from the production and sale of 4,700 units of cell phones.
$ 83930

b. Determine the product cost per unit for the production of 4,700 of cell phones. If required, round your answer to nearest dollar.
$ 173 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.

Variable costs:				Fixed costs:
	Direct materials	$74	per unit			Factory overhead	$200,400
	Direct labor	31				Selling and admin. exp.	69,000
	Factory overhead	25
	Selling and admin. exp.	21
		Total variable cost per unit	$151	per unit

Solution

1 the amount of desired profit from the production and sale of 4,700 units of cell phones. DesiredProfit= Cost of ivetsed asset*4% =599500*.14 =$83930 Desired Profit p.u = $83930/4700                                        17.86 2 Total Cost Total VariableCost p.u                                                       151.00 FxedCost p.u                                                         14.68 (200400+69000)/4700uniits                                                       165.68 Cost per unit = $166 p.u 3 Determine the product cost markup percentage (rounded to two decimal places) for cell phones $ p.u Cost per unit = $166 Desired Profit = $17.86 Mark up on Cost = Profit/Cost 10.76% (17.86/166*100) 4 Determine the selling price of cell phones. Cost per unit = $166 Desired Profit = $17.86 Estimated Selling Price $183.86