Product Pricing using the Cost-Plus Approach Methods; Differential Analysis for Accepting AdditionalBusinessNight Glow Inc. recently began production of a new product, the halogen light, which required theinvestment of $600,000 in assets. The costs of producing and selling 10,000 halogen lights are estimatedas follows:Variable costs per unit: Fixed costs:Direct materials $32 Factory overhead $180,000Direct labor 12 Selling and administrative expenses 80,000Factory overhead 8Selling and administrative expenses 7Total variable cost per unit $59Night Glow Inc. is currently considering establishing a selling price for the halogen light. The president ofNight Glow Inc. has decided to use the cost-plus approach to product pricing and has indicated that thehalogen light must earn a 10% return on invested assets. Note: Round all markup percentages to two decimal places, if required. Round all costs per unit andselling prices per unit to the nearest whole dollar.1. Determine the amount of desired profit from the production and sale of the halogen light. Assuming that the product cost method is used, determine the following:a. Product Cost amount per unit $b. Markup percentage %c. Selling price per unit 3. (Appendix) Assuming that the total cost method is used, determine the following:a. Total Cost amount per unit $b. Markup percentage %c. Selling price per unit 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 6. Assume that as of September 1, 7,000 units of halogen light have been produced and sold during thecurrent year. Analysis of the domestic market indicates that 3,000 additional units of the halogen light areexpected to be sold during the remainder of the year at the normal product price determined under theproduct cost method. On September 5, Night Glow Inc. received an offer from Tokyo Lighting Inc. for1,600 units of the halogen light at $57 each. Tokyo Lighting Inc. will market the units in Japan under itsown brand name, and no variable selling and administrative expenses associated with the sale will beincurred by Night Glow Inc. The additional business is not expected to affect the domestic sales of the halogen light, and the additional units could be produced using existing productive, selling, andadministrative capacity.a. Prepare a differential analysis of the proposed sale to Tokyo Lighting Inc. If an amount is zero, enter"0".
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.
Note: Round all markup percentages to two decimal places, if required. Round all costs per unit and
selling prices per unit to the nearest whole dollar.
1. Determine the amount of desired profit from the production and sale of the halogen light.
Assuming that the product cost method is used, determine the following:
a. Product Cost amount per unit $
b. Markup percentage %
c. Selling price per unit
3. (Appendix) Assuming that the total cost method is used, determine the following:
a. Total Cost amount per unit $
b. Markup percentage %
c. Selling price per unit
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
6. Assume that as of September 1, 7,000 units of halogen light have been produced and sold during the
current year. Analysis of the domestic market indicates that 3,000 additional units of the halogen light are
expected to be sold during the remainder of the year at the normal product price determined under the
product cost method. On September 5, Night Glow Inc. received an offer from Tokyo Lighting Inc. for
1,600 units of the halogen light at $57 each. Tokyo Lighting Inc. will market the units in Japan under its
own brand name, and no variable selling and administrative expenses associated with the sale will be
incurred by Night Glow Inc. The additional business is not expected to affect the domestic sales of the
halogen light, and the additional units could be produced using existing productive, selling, and
administrative capacity.
a. Prepare a differential analysis of the proposed sale to Tokyo Lighting Inc. If an amount is zero, enter
"0".
Trending now
This is a popular solution!
Step by step
Solved in 3 steps with 7 images
