MyPhone, Inc. uses the product cost method of applying the cost-plus approach to product pricing. The costs of producing and selling 5,080 cell phones are as follows: Variable costs per unit: Fixed costs: Direct materials $71 Factory overhead $201,900 Direct labor 37 Selling and administrative expenses 71,300 Factory overhead 26 Selling and administrative expenses 20 Total variable cost per unit $154 MyPhone desires a profit equal to a 16% rate of return on invested assets of $598,400. a. Determine the amount of desired profit from the production and sale of 5,080 cell phones.$ b. Determine the product cost per unit for the production of 5,080 of cell phones. Round your answer to the nearest whole dollar.$ per unit c. Determine the product cost markup percentage for cell phones. Round your answer to two decimal places. % d. Determine the selling price of cell phones. Round your answers to the nearest whole dollar. Total Cost $per unit Markup per unit Selling price $per unit
Cost-Volume-Profit Analysis
Cost Volume Profit (CVP) analysis is a cost accounting method that analyses the effect of fluctuating cost and volume on the operating profit. Also known as break-even analysis, CVP determines the break-even point for varying volumes of sales and cost structures. This information helps the managers make economic decisions on a short-term basis. CVP analysis is based on many assumptions. Sales price, variable costs, and fixed costs per unit are assumed to be constant. The analysis also assumes that all units produced are sold and costs get impacted due to changes in activities. All costs incurred by the company like administrative, manufacturing, and selling costs are identified as either fixed or variable.
Marginal Costing
Marginal cost is defined as the change in the total cost which takes place when one additional unit of a product is manufactured. The marginal cost is influenced only by the variations which generally occur in the variable costs because the fixed costs remain the same irrespective of the output produced. The concept of marginal cost is used for product pricing when the customers want the lowest possible price for a certain number of orders. There is no accounting entry for marginal cost and it is only used by the management for taking effective decisions.
MyPhone, Inc. uses the product cost method of applying the cost-plus approach to product pricing. The costs of producing and selling 5,080 cell phones are as follows:
| Variable costs per unit: | Fixed costs: | ||||||
| Direct materials | $71 | Factory overhead | $201,900 | ||||
| Direct labor | 37 | Selling and administrative expenses | 71,300 | ||||
| Factory overhead | 26 | ||||||
| Selling and administrative expenses | 20 | ||||||
| Total variable cost per unit | $154 |
MyPhone desires a profit equal to a 16%
a. Determine the amount of desired profit from the production and sale of 5,080 cell phones.
$
b. Determine the product cost per unit for the production of 5,080 of cell phones. Round your answer to the nearest whole dollar.
$ per unit
c. Determine the product cost markup percentage for cell phones. Round your answer to two decimal places.
%
d. Determine the selling price of cell phones. Round your answers to the nearest whole dollar.
| Total Cost | $per unit |
| Markup | per unit |
| Selling price | $per unit |
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