Question

Voice Com, Inc., produces and sells cellular phones. The costs of producing and selling 8,000 units of cellular phones are as follows: Variable costs: Fixed costs: Direct materials $ 81 per unit Factory overhead $325,600 Direct labor 37 Selling and admin. exp. 114,400 Factory overhead 24 Selling and admin. exp. 20 Total $162 per unit Voice Com desires a profit equal to a 14% rate of return on invested assets of $942,400. Assume that Voice Com, Inc., uses the total cost concept of applying the cost-plus approach to product pricing. a. Determine the total costs and the total cost amount per unit for the production and sale of 8,000 units of cellular phones. Round the cost per unit to two decimal places. Total cost $ fill in the blank 1 Cost amount per unit $ fill in the blank 2 b. Determine the total cost markup percentage (rounded to two decimal places) for cellular phones. fill in the blank 3 % c. Determine the selling price of cellular phones. Round to the nearest cent. $ fill in the blank 4 per phone

Answer 1

Voice Com, Inc.

1a. Total costs = $1,621,600

1b. Total cost per unit = $202.70

2a. Mark-up amount = $131,936

2b. Mark-up percentage = 8.14%

2c. Selling price = $219.19

Step-by-step explanation:

a) Data and Calculations:

Variable costs per unit:

Direct materials $ 81

Direct labor 37

Factory overhead 24

Selling and admin. exp. 20

Total per unit $162

Fixed costs:

Factory overhead $325,600

Production and sales units = 8,000

Rate of return on invested assets = 14%

Desired profit = $131,936 ($942,400 * 14%)

Sales revenue = Total costs + Desired profit

= $1,753,536

1a. Total costs = $1,621,600 ($162 * 8,000 + $325,600)

1b. Total cost per unit = $202.70 ($1,621,600/8,000)

2a. Mark-up amount = $131,936

2b. Mark-up percentage = 8.14% ($131,936/$1,621,600 * 100)

2c. Selling price = $219.19 ($1,753,536/8,000)