FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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Variable Cost Concept of Product Pricing

Smart Stream Inc. uses the variable cost concept of applying the cost-plus approach to product pricing. The costs of producing and selling 4,500 units of cellular phones are as follows:

Variable costs:   Fixed costs:  
    Direct materials $ 90 per unit     Factory overhead $223,800
    Direct labor 41       Selling and admin. exp. 78,600
    Factory overhead 27      
    Selling and admin. exp. 22      
     Total $180 per unit    

Smart Stream wants a profit equal to a 15% rate of return on invested assets of $630,000.

a.  Determine the variable costs and the variable cost amount per unit for the production and sale of 4,500 units of cellular phones. Round to two decimal places.

Total variable costs $fill in the blank 1
Variable cost amount per unit $fill in the blank 2

b.  Determine the variable cost markup percentage 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 cellular phone

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