Homework SourseProduct 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.
$
b. Determine the product cost per unit for the production of 4,700 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.
| 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
Total Unit produced is 4700 so multiply all the variable cost per unit with appropriate rate
Working note 1
a)Desired profit is 14% return on invested asset of $599,500 which is = $599,400*14% = $83,916
b) Product Cost per unit will be Total Cost divided by number of units produced. Hence ,
$979,100/4700 = $208.32 product cost per unit.
c) Markup on product cost = Sales price per unit - Product cost per unit = $226.14-$208.32 = 8.55% of markup.
Product cost per unit $208.32
d) Cost per unit = $208.32. Sales price per unit =$226.14. Markup per unit = $17.82 Refer the above table
All the figues are rounded of
Desired Profit formula = Contribution + Fixed Cost
Sales = Contribution + variable cost
Use all the above formulas it will surely help.
| Particulars | Per unit $ | Amount in $ |
| Sales (C+B) | 226.17 | $1,063,016 |
| Direct Material | 74 | $347,800 |
| Direct labour | 31 | $145,700 |
| Factory overhead | 25 | $117,500 |
| Selling and Admin cost | 21 | $98,700 |
| Totat Variable cost (B) | 151 | $709,700 |
| Contribution C= (E+D) | $353,316 | |
| Factory Overhead | $200,400 | |
| Selling and Admin exp | $69,000 | |
| Total Fixed Cost (D) | $269,400 | |
| Total Cost (B+D) | 208.32 | $979,100 |
| Desired Profit see working note 1. ( E) | $83,916 |
