Total Cost Concept of Product Prioing Voice Com, Inc., produces and sells cellul
ID: 2592890 • Letter: T
Question
Total Cost Concept of Product Prioing Voice Com, Inc., produces and sells cellular phones. The costs of producing and selling 7,500 units of cellular phones are as follows: Variable costs: Fixed costs Direct materials Direct labor Factory overhead Selling and admin. exp 595 per unit Factory overhead $360,800 Selling and admin. exp 126,700 29 Total 190 per unit Voice Com desires a profit equal to a 14% rate of return on mvested assets of $1,092,860. Assume that Voice Com, Inc., uses the total cost concept of applying the cost-plus approach to product pricing. a. Determine the total costs and the total cost amount per unit for the production and sale of 7,500 units of cellular phones. Round the cost per unit to two decimal places. Total cost Cost amount per unit b. Determine the total cost markup percentage (rounded to two decimal places) for cellular phones c. Determine the selling price of cellular phones Round to the nearest cent phoneExplanation / Answer
a Total Cost Variable Costs 190*7500 1425000 FOH 360800 Selling & Adm exp 126700 Total COst 1912500 Cost per unit 1912500/7500 255 b 8.0% [(1,092,860 x 0.14)/1,912,500] x 100 c 275.4 per phone (255 x 0.08) + 255