Question

Our company is a price taker and has the following information available for the current year:budgeted production, 200,000 units;desired operating income as a percentage of total assets, 15%;current market price of our product, $50 per unit; andtotal assets, $12,000,000.What is the full product cost for the year

Answer 1

$8,200,000

Step-by-step explanation:

Operating income = Revenue - Cost of goods sold

Provided revenue = $50 per unit

For 200,000 units

Total Revenue = 200,000
`*` $50 = $10,000,000

Desired operating income = 15% of Total assets

Total assets = $12,000,000

Desired operating income in dollars = $12,000,000
`*` 15%

= $1,800,000

Total revenue - Operating profit = Cost of goods sold = $10,000,000 - $1,800,000 = $8,200,000