Answered: Smart Stream Inc. uses the variable…

Managerial Accounting

15th Edition

ISBN:9781337912020

Author:Carl Warren, Ph.d. Cma William B. Tayler

Publisher:Carl Warren, Ph.d. Cma William B. Tayler

Chapter11: Differential Analysis And Product Pricing

Section: Chapter Questions

Problem 17E: Product cost method of product costing Smart Stream Inc. uses the product cost method of applying...

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Question

Smart Stream Inc. uses the variable cost method of applying the cost-plus approach to product pricing. The costs of producing and selling 10,000 cell phones are as follows:

Variable costs per unit:				Fixed costs:
	Direct materials	$150			Factory overhead	$350,000
	Direct labor	25			Selling and admin. exp.	140,000
	Factory overhead	40
	Selling and administrative expenses	25
		Total variable cost per unit	$240

Smart Stream desires a profit equal to a 30% return on invested assets of $1,200,000.

a. Determine the variable costs and the variable cost amount per unit for the production and sale of 10,000 cellular phones.

Total variable costs	$
Variable cost amount per unit	$

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

c. Determine the selling price of cellular phones. If required, round to the nearest dollar.
$ per cellular phone

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