McClelland Corporation uses the total costconcept of product pricing. Below is c
ID: 2434137 • Letter: M
Question
McClelland Corporation uses the total costconcept of product pricing. Below is cost information for theproduction and sale of 40,000 units of its sole product. McClellanddesires a profit equal to a 14% rate of return on invested assetsof $400,000.
Fixed factory overhead cost $25,000.00
Fixed selling and administrative costs5,000.00
Variable direct materials cost per unit3.00
Variable direct labor cost per unit1.25
Variable factory overhead cost per unit 75cents
Variable selling and administrative cost per unit3.00
a. $56,000
b. $44,800
c. $49,000
d. $64,000
Explanation / Answer
This is a Trick question. There is alot of data given but keystt is "McClelland desires a profit equal to a 14% rateof return on invested assets of $400,000."
And question to answer is "The dollar amount ofdesiredprofit from the production and sale of thecompany's product is:"
So 14% of $400,000 = $56,000 which is the desired profit:)