Answer:
I Co.
1. Desired profit = 10% of invested assets
= $3,200,000 x 10%
= $320,000
2a. Total Variable cost per unit
Variable costs Per unit
:
Direct labor $
10
Direct materials 6
Factory overhead $
4
Variable Product Cost ($20)
Administrative and selling $
5
Total Variable cost per unit $25
b. Total fixed cost per unit
Total fixed cost per unit = $2,400,000/160,000 = $15
c. The selling price per unit
Sales / quantity = $7,520,000/160,000 = $47
Explanation:
Data:
Variable costs Per unit
:
Direct labor $
10
Direct materials 6
Factory overhead $
4
Variable Product Cost $20
Administrative and selling $
5
Total Variable cost per unit $25
EA
Fixed costs:
Manufacturing $ 1,600,000
Administrative and selling 800,000
Total fixed costs $2,400,000
b) Cost-plus approach to product pricing: This approach requires the addition of the direct materials, direct labor, and overhead costs
c) Required profit = 10% of invested assets
= $3,200,000 x 10%
= $320,000
d) Product cost:
Variable cost = $20 x 160,000 = $3,200,000
Fixed manufacturing costs $1,600,000
Total production cost $4,800,000
Product cost per unit $4,800,000/160,000 = $30
e) Income Statement to determine Sales Revenue
Sales $7,520,000
Cost of goods sold
($30 x 160,000) 4,800,000
Gross profit $2,720,000
Fixed Costs:
Manufacturing $ 1,600,000
Administrative & selling 800,000
Profit $320,000
