Mendoza Corporation uses the product cost concept of product pricing. Below is c
ID: 2489505 • Letter: M
Question
Mendoza Corporation uses the product cost concept of product pricing. Below is cost information for the production and sale of 45,000 units of its sole product. Mendoza desires a profit equal to a 10.8% rate of return on invested assets of $900,000. Fixed factory overhead cost $72,000 Fixed selling and administrative costs 45,000 Variable direct materials cost per unit 4.50 Variable direct labor cost per unit 7.65 Variable factory overhead cost per unit 2.25 Variable selling and administrative cost per unit .90
The cost per unit for the production and sale of the company’s product is a. $12. b. $16. c. $15. d. $13.50.
Explanation / Answer
Cost per unit for the production = $16
Fixed overhead cost per unit = $72,000/45,000 = $1.60 per unit
Unit cost
Direct materials cost $4.50 Direct labor $7.65 Variable facotry overhead $2.25 Fixed Factory overhead $1.60 cost per unit of production $16