Total Cost Concept of Product Costing Willis Products Inc. uses the total cost c
ID: 2556118 • Letter: T
Question
Total Cost Concept of Product Costing Willis Products Inc. uses the total cost concept of applying the cost-plus approach to product pricing. The costs of producing and selling 2,000 units of medical tablets are as follows: Variable costs per unit: Fixed costs Direct materials Direct labor Factory overhead Selling and admin. exp $114 42 35 29 Factory overhead $80,000 Selling and admin. exp. 26,000 Total Willis Products desires a profit equal to a 25% rate of return on invested assets of $224,952 a. Determine the amount of desired profit from the production and sale of 2,000 units. b. Determine the total costs for the production of 2,000 units Fixed TotalExplanation / Answer
A
Amount of desired profit from sale of 2000 units
$56,238
(224,952*25%)
B
Total cost of production of 2,000 units
Variable cost (220*2,000)
$440,000
Fixed cost (80,000+26,000)
$106,000
Total cost of production of 2,000 units
$546,000
C
Cost per unit of production
Total cost
$546,000
No of units
2,000
Per unit cost
$273
D
Cost markup per unit
Desired profit per unit ($56,238/2,000)
$28.12
Total cost per unit
$273
Mark up on cost (28.12/273*100)
10.3%
E
Selling price per unit
Desired profit per unit ($56,238/2,000)
$28.12
Total cost per unit
$273
Selling price per unit
$301.12
A
Amount of desired profit from sale of 2000 units
$56,238
(224,952*25%)
B
Total cost of production of 2,000 units
Variable cost (220*2,000)
$440,000
Fixed cost (80,000+26,000)
$106,000
Total cost of production of 2,000 units
$546,000
C
Cost per unit of production
Total cost
$546,000
No of units
2,000
Per unit cost
$273
D
Cost markup per unit
Desired profit per unit ($56,238/2,000)
$28.12
Total cost per unit
$273
Mark up on cost (28.12/273*100)
10.3%
E
Selling price per unit
Desired profit per unit ($56,238/2,000)
$28.12
Total cost per unit
$273
Selling price per unit
$301.12