Crystal Displays inc. recently began production of a new product, flat panel displays, which required the investment of $1,500,000 in assets. The costs of producing and selling 5,000 units of flat panei displays are estimated as follows: Crystal Displays Inc. is currently considering establishing a selling price for flat panel displays. The president of Crystal Displays has decided to use the cost-plus approach to product pricing and has indicated that the displays must earn a 15% return on invested assets. Required: 1. Determine the amount of desired profit from the production and sale of flat panel displays. 2. Assuming that the product cost methad 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 used, determine (a) the cost amount per unit, (b) the markup percentage, and (c) the selling price of flat panel displays. " 4. (Appendix) Assuming that the variabie cost method is used, determine (a) the cost amount per unit, (b) the markup porcentage, and (c) the seling price of flat panel displays." 5. Comment on any additional considerations that could influence estabishing the seling price for flat parel displays. 6. Assume that as of August 1,3,000 units of fat panel displays have been produced and sold duning the current year. Analysis of the domestio market indicetes 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 ina, received an offer from Maplo Leal Visual inc. for: 800 units of fat panel displays at s225 each. Maple Leaf Visual inc. Wii market the units in Canada under its own brand name, and no Product pricing using the cost-plus approach methods; differential analysis for accepting additional business instructions 3. (Appendix) Assuming that the total cost method is used, determine (a) the cost amount per unit, (b) the markup percentage, and (c) the selling price of flat panel displays. " 4. (Appendix) Assuming that the variable cost method is used, delermine (a) the cost amount per unit, (b) the markup percontage, and (c) the selling price of flat panel displays." 5. Comment on any additional considerations that could influence establishing the selling price for flat panel displays. 6. 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 Lear 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 variable 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 Leal Visual inc. Refer to the lists of Labels and Amount Descriptions for the exact wording of the answer choices for text entries. For those boxes in which you must enter subtracted or negative numbers use a minus sign. If there is no amount or an amount is zero, enter 0: : A colon ( ) will automatically appear if required. b. Based on the differential anaysis in part (a), should the proposal be accopted? 'Aound your markup percentage to two decimal places and your final answer to nearest dollar arnount. Product pricing using the cost-plus approach methods; differential analysis for accepting additional business Starting Questions 1. Determine the amount of desired profit from the production and sale of flat panel displays. 2. Assuming 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 dispiays. 3. (Appendix) Assuming that the botal cost mothod is used, determine (a) the cost amount per unt, (b) the markup percentage and (e) the seling : price of flat panel displays. Round your markup percentage to two decinal places and your Gnal answer to neareat dollar anount: Cost amount per unit Markup percentage 4. (Appendix) Assuming that the variable cost method is used, determine (a) the cost amount per unit, (b) the markup percentage, and (c) the selling price of flat panel displays. Round your markup porcentage to two decimal places and your final answer to nearest doillar amount 5. Comment on any additional considerations that could influence ostabishing the seling price for Alt panel displays. The cost-plus approach price computed above should be viewed as a general guideline for estabishing long-run narmal prices; however, other considerations, such as , coild lead management to establish a different short-run price. 6a. Prepare a differential analysis of the proposed sale to Maple Leaf Visual inc. Refor to the lists of Labels and Amount Descriptions far the exact wording of the answer choices for text entries. For those boxes in which you must enfer subtracted or negative numbers use a minus sign. It there is no amount or an amount is zero, enter " 0. A colon ( ) will automabically appear if requtred. 6b. Based on the ditferential analysis in part (a), should the proposal be accepted? No Yes The company is indifferent since the result is the same regardless of which allemative is chosen
