Voice Com, Inc., produces and sells cellular phones. The costs of producing and selling 8,000 units of cellular phones are as follows:
| Variable costs: | Fixed costs: | |||
| Direct materials | $ 75 | per unit | Factory overhead | $305,800 |
| Direct labor | 35 | Selling and admin. exp. | 107,450 | |
| Factory overhead | 23 | |||
| Selling and admin. exp. | 17 | |||
| Total | $150 | per unit | ||
Voice Com desires a profit equal to a 15% rate of return on invested assets of $525,000.
Assume that Voice Com, Inc., uses the variable cost concept of applying the cost-plus approach to product pricing.
a. Determine the variable costs and the variable cost amount per unit for the production and sale of 8,000 units of cellular phones.
| Total variable costs | $ |
| Variable cost amount per unit | $ |
b. Determine the variable cost markup
percentage for cellular phones.
%
c. Determine the selling price of cellular
phones. Round to the nearest cent.
$ per phone
| a) | |||
| Direct material | 600000 | ||
| direct labor | 280000 | ||
| factory overhead | 184000 | ||
| selling & adm exp | 136000 | ||
| total variable cost | 1200000 | ||
| no of units | 8000 | ||
| variable cost amount per unit | 150 | ||
| b) | |||
| desired profit (525000*15%) | 78750 | ||
| fixed cost | |||
| Factory overhead | 305800 | ||
| selling & admin exp | 107450 | 413250 | |
| Contribution | 492000 | ||
| total variable cost | 1200000 | ||
| Varible cost markup % | 41% | ||
| d) | |||
| variable cost amount per unit | 150 | ||
| add: markup @ 41% | 61.5 | ||
| selling price | 211.5 | ||
Voice Com, Inc., produces and sells cellular phones. The costs of producing and selling 8,000 units...