Crystal Displays Inc. recently began production of a new product, estimated as follows: panel displays, which required the investment of $1,500,000 in assets. The cost of producing and selling 5,000 units of flat panel displays are Variable costs per unit: Direct materials Direct labor $250,000 $120 30 Fixed costs: Factory overhead Selling and administrative expenses 150,000 Factory overhead Selling and administrative expenses Total variable cost per unit 5235 Crystal Displays Inc. is currently considering establishing a selling price for at panel displays. The president of Crystal Displays has decided to use the cost plus approach to product pring and has indicated that the displays must earn a 15% return on invested assets Required: Note: Round all markup percentages to two decimal places, if required. Round all costs per unit and selling prices per unit to the nearest whole dollar 1. Determine the amount of desired profit from the production and sale of at panel displays $225,000 2. Assuming that the product cost method is used, determine the following: .. Product cost amount per unit b. Markup percentage c. Seling price per unit 3. (Aspendix) Assuming that the total cost method is used determine the following: a. Total cost amount per unit b. Markup percentage 4. Apend) Assuming that the variatie cost method is used, determine the following a. Variable cost amount per unit b. Markup percentage e. Selling price per unit 5. The cost plus approach price computed above should be viewed as a general guideline for establishing long-run normal prices; however, other considerations, such as the price of competing products and general economie conditions of the marketplace could ad management to establish a different thor-run price 6. Assume that as of August 1, 3,000 units of a panel displays have been produced and cold bring the current year. Analysis of the domestic market indicates that 2.000 additional units are expected to be said during the remainder of the year of the normal product price determined under the product cost method. On August 3, Crystal Displays I received an offer from Maple Lea Vueline for 100 units of natal dinglays at 1225 each, Maple Leal Visual Inc. wil market the units in Canada under sown brand name, and no variable selling and administrative penses 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. If an amount is ere, entero" Differential Analysis Reject (Alt. 1) or Accept (Art. 2) Order August 3 Differential (Alternative 1) (Alternative 2) (Alternative 2) Revenues Variable manufacturing costs Prate (los) b. Based on the differential analysis in part (a), should the proposal be accepted? Yes Next >
