Chapter 24 Differential Analysis and Product Pricing 2. B. Markup percentage, 44% Crystal Displays l 911 Appendix OTONDO nog nongo O29107 ng bo n uod OS or to 0. 9 101 Obj. 1, 2 PR 24-5A Product pricing using the cost-plus approach methods differential analysis for accepting additional business Displays Inc. recently began production of a new product, flat panel displays, which required the uired the investment of $1,500,000 in issets. The costs of producing and selling 2,000 of flat panel displays are estimated as follows: o lev n bivors bonood Fixed costs: $120 Factory overhead $250,000 30 Selling and administrative expenses 150,000 291196 arieldot $235 Variable costs per unit: Direct materials Direct labor Factory overhead Selling and administrative expenses Total variable cost per unit Crystal Displays Inc. is currently considering est The president of Crystal Displays ha splays Inc. is currently considering establishing a selling price for flat panel displays. and has ind of Crystal Displays has decided to use the cost-plus approach to product pricing nils indicated that the displays must eam a 15% return on invested assets. Instructions erinine the amount of desired profit from the production and sale of flat panel displays. 2. Assuming that the product cost method mng that the product cost method is used, determine (A) the cost amount per unit, (B) the markup percentage, and (C) the selling price of flat panel displays. 3. (Appendix) Assuming that the total cost method is u x) Assuming that the total cost method is used, determine (A) the cost amount per e markup percentage (rounded to two decimal places), and (C) the selling price of flat panel displays. (Round markup to nearest whole dollar 4. Appendix) Assuming that the variable cost method is used, determine (A) the cost amount per unit, (B) the markup percentage (rounded to two decimal places), and C) the selling price of flat panel displays. (Round markup to nearest whole dollar Comment on any additional considerations that could influence establishing the selling price for flat panel displays. 0. Assume that as of August 1, 3,000 units of flat panel displays have been produced and sold during the current year. Analysis of the domestic market indicates that 2.000 additional units are expected to be sold during the remainder of the year at the normal product price determined under the product cost method. On August 3, Crystal Displays Inc, received an offer from Maple Leaf Visual Inc. for 800 units of flat panel displays at $225 each. Maple Leaf Visual Inc. will market the units in Canada under its own brand name, and no vari able selling and administrative expenses associated with the sale will be incurred by Crystal Displays Inc. The additional business is not expected to affect the domestic sales of flat panel displays, and the additional units could be produced using existing factory, selling. and administrative capacity. A. Prepare a differential analysis of the proposed sale to Maple Leaf Visual Inc. B. Based on the differential analysis in part (A), should the proposal be accepted
