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Accounting

27th Edition
WARREN + 5 others
ISBN: 9781337272094

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BuyFindarrow_forward

Accounting

27th Edition
WARREN + 5 others
ISBN: 9781337272094
Textbook Problem

Product cost concept of product costing

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

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

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

a. Determine the amount of desired profit from the production and sale of 10,000 cellular phones.

b. Determine the product cost and the cost amount per unit for the production of 10,000 cellular phones.

c. Determine the product cost markup percentage for cellular phones.

d. Determine the selling price of cellular phones.

a)

To determine

Product pricing: Product pricing is the method used for fixing the price for the products sold or the services offered to the consumers.

To Determine: The amount of desired profit from the production and sale of 10,000 cellular phones.

Explanation

The Company SS has decided to earn a profit of 30% of the assets invested in the company, which is $1,200,000.

Calculate the desired profit for the Company SS.

Desired profit = 30% of Invested assets= $1,200,000 × 30%</

b)

To determine
The product cost per unit for the production of cellular phones.

c)

To determine
The product cost markup percentage for cellular phones.

d)

To determine
The selling price per unit of cellular phone.

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