Question

Magpie Corporation uses the total cost concept of product pricing. Below is cost information for the production and sale of 60,000 units of its sole product. Magpie desires a profit equal to a 25% rate of return on invested assets of $700,000
Fixed factory overhead cost 38,700
fixed selling and administration costs 7,500
variable direct materials cost per unit 4.60
variable direct labor cost per unit 1.88
variable factory overhead cost per unit 1.13
variable selling and administration cost per unit 4.50

The dollar amount of desired profit from the production and sales of the company's product is?

The cost per unit for the production and sale of the company's product is?

Th markuP percentage on total cost for the company's producThe unit selling price for the company's product is?

Answer 1

Answer:

Explanation:

1) Desired profit = Invested asset * Rate of return = $700,000*25% = $175,000

2) x - selling price of the product

60,000x - 784,600 = 175,000

60,000x = $959,600

x = $16

Total product cost = Total fixed cost + Total variable cost = (38,700+7500) +

((4.60+1.88+1.33+4.50)*60,000) = 46,200 + 12.31*60,000 = 46,200+738,600 = $784,800

3)

Mark-up percentage = Desired profit/Total product cost = $175,000/$784,800 = 0.2229 = 22.29%