Question

Magpie Corporation uses the total cost concept of product pricing. Below is the cost information for the production and sale of 58,700 units of its sole product. Magpie desires a profit equal to a 21% rate of return on invested assets of $605,000. Fixed factory overhead cost.........................................$38,500 Fixed selling and administrative costs........................ 8,000 Variable direct materials cost per unit........................ 5.17 Variable direct labor cost per unit................................1.88 Variable factory overhead cost per unit.......................1.13 Variable selling and administrative cost per unit........ 4.50 The dollar amount of desired profit from the production and sale of the company's product is:a. $12.11b. $12.88c. $15d. $13.50

Answer 1

Answer:

Correct answer is C. $ dollars.

Calculation:

Rate of Retun PU = (21%*605,000)/58,700 = 2.16

Fixed factory overhead PU = 38,500/58,700 = 0.66

Fixed selling and administration PU=  8000/58,700 = 0.14

Variable DM PU = 5.17

Variable Labour PU = 1.88

Variable FOH PU = 1.33

Variable selling and Admin PU  = 4.5

By adding all above mentioned per unit cost we get 15 dollars aprox

so

Correct answer is 15 dollar.