Product Pricing using the Cost-Plus Approach Methods; Differential Analysis for Accepting Additional Business Night Glow Inc. recently began production of a new product, the halogen light, which required the investment of $600,000 in assets. The costs of producing and selling 10,000 halogen lights are estimated as follows: Variable costs per unit:     Fixed costs:   Direct materials $32   Factory overhead $180,000 Direct labor 12   Selling and administrative expenses 80,000 Factory overhead 8       Selling and administrative expenses 7       Total variable cost per unit $59         Night Glow Inc. is currently considering establishing a selling price for the halogen light. The president of Night Glow Inc. has decided to use the cost-plus approach to product pricing and has indicated that the halogen light must earn a 10% return on invested assets. Required:   4.  (Appendix) Assuming that the variable cost method is used, determine the following: a.  Variable cost amount per unit     b.  Markup percentage   % c.  Selling price per unit

Question

Product Pricing using the Cost-Plus Approach Methods; Differential Analysis for Accepting Additional Business

Night Glow Inc. recently began production of a new product, the halogen light, which required the investment of $600,000 in assets. The costs of producing and selling 10,000 halogen lights are estimated as follows:

Variable costs per unit:     Fixed costs:  
Direct materials $32   Factory overhead $180,000
Direct labor 12   Selling and administrative expenses 80,000
Factory overhead 8      
Selling and administrative expenses 7      
Total variable cost per unit $59      

 

Night Glow Inc. is currently considering establishing a selling price for the halogen light. The president of Night Glow Inc. has decided to use the cost-plus approach to product pricing and has indicated that the halogen light must earn a 10% return on invested assets.

Required:

 

4.  (Appendix) Assuming that the variable cost method is used, determine the following:

a.  Variable cost amount per unit    
b.  Markup percentage   %
c.  Selling price per unit    

 

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