Smart Stream Inc. uses the total cost method of applying the cost-plus approach to product pricing. The costs of producing and selling 5,500 units of cell phones are as follows:Variable costs per unit: Fixed costs:     Direct materials$ 92     Factory overhead$256,400    Direct labor42     Selling and administrative expenses90,100    Factory overhead28       Selling and administrative expenses22            Total variable cost per unit$184   Smart Stream desires a profit equal to a 14% return on invested assets of $756,880.a.  Determine the total costs and the total cost amount per unit for the production and sale of 5,500 cellular phones. Round the cost per unit to two decimal places.Total cost$Total cost amount per unit$b.  Determine the total cost markup percentage for cellular phones. Round your answer to two decimal places. %c.  Determine the selling price of cellular phones. Round to the nearest cent.$ per cellular phone

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Asked Dec 1, 2019
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Smart Stream Inc. uses the total cost method of applying the cost-plus approach to product pricing. The costs of producing and selling 5,500 units of cell phones are as follows:

Variable costs per unit:   Fixed costs:  
    Direct materials $ 92       Factory overhead $256,400
    Direct labor 42       Selling and administrative expenses 90,100
    Factory overhead 28      
    Selling and administrative expenses 22      
         Total variable cost per unit $184      

Smart Stream desires a profit equal to a 14% return on invested assets of $756,880.

a.  Determine the total costs and the total cost amount per unit for the production and sale of 5,500 cellular phones. Round the cost per unit to two decimal places.

Total cost $
Total cost amount per unit $

b.  Determine the total cost markup percentage for cellular phones. Round your answer to two decimal places.
 %

c.  Determine the selling price of cellular phones. Round to the nearest cent.
$ per cellular phone

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Expert Answer

Step 1

Cost plus approach involves addition of a mark-up value to the total cost.

Computation of Total Cost

Amount Amount
Particulars
Direct Materials
92
Direct Labor
42
Factory Overhead
Selling and Admin
28
22
184
Total Units
5500
Total Variable Cost
1012000
Fixed Cost
Factory Overhead
256400
Selling and Admin
90100
346500
Total Cost
1358500
No of Units
5500
Cost per unit
247
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Amount Amount Particulars Direct Materials 92 Direct Labor 42 Factory Overhead Selling and Admin 28 22 184 Total Units 5500 Total Variable Cost 1012000 Fixed Cost Factory Overhead 256400 Selling and Admin 90100 346500 Total Cost 1358500 No of Units 5500 Cost per unit 247

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Step 2

Mark-up Va...

Desired Profit = 756880*14% = $105,963
Particulars
Amount
Total Cost
1358500
Desired
Profit
105963
Mark-up %
on Total Cost
7.80%
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Desired Profit = 756880*14% = $105,963 Particulars Amount Total Cost 1358500 Desired Profit 105963 Mark-up % on Total Cost 7.80%

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