Product Cost Method of Product Costing

MyPhone, Inc. uses the product cost method of applying the cost-plus approach to product pricing. The costs of producing and selling 4,970 cell phones are as follows:

Differential Analysis Involving Opportunity Costs

On July 1, Matrix Stores Inc. is considering leasing a building and buying the necessary equipment to operate a public warehouse. Alternatively, the company could use the funds to invest in $150,300 of 6% U.S. Treasury bonds that mature in 16 years. The bonds could be purchased at face value. The following data have been assembled:

Cost of store equipment		$150,300
Life of store equipment		16 years
Estimated residual value of store equipment		$18,500
Yearly costs to operate the warehouse, excluding depreciation of equipment		$55,900
Yearly expected revenuesyears 1-8		74,900
Yearly expected revenuesyears 9-16		70,400

Required:

Question Content Area

1. Prepare a differential analysis as of July 1 presenting the proposed operation of the warehouse for the 16 years (Alternative 1) as compared with investing in U.S. Treasury bonds (Alternative 2). If an amount is zero, enter "0". If required, use a minus sign to indicate a loss.

Differential Analysis Operate Warehouse (Alt. 1) or Invest in Bonds (Alt. 2) July 1

	Operate Warehouse (Alternative 1)	Invest in Bonds (Alternative 2)	Differential Effects (Alternative 2)
Revenues	$fill in the blank 795a6e0eafea077_1	$fill in the blank 795a6e0eafea077_2	$fill in the blank 795a6e0eafea077_3
Costs:
Costs to operate warehouse	fill in the blank 795a6e0eafea077_4	fill in the blank 795a6e0eafea077_5	fill in the blank 795a6e0eafea077_6
Cost of equipment less residual value	fill in the blank 795a6e0eafea077_7	fill in the blank 795a6e0eafea077_8	fill in the blank 795a6e0eafea077_9
Profit (Loss)	$fill in the blank 795a6e0eafea077_10	$fill in the blank 795a6e0eafea077_11	$fill in the blank 795a6e0eafea077_12

Question Content Area

2. Based on the results disclosed by the differential analysis, should the proposal be accepted?

YesNo

3. If the proposal is accepted, what is the total estimated operating income of the warehouse for 16 years? $fill in the blank 195bf208efaff8a_2

MyPhone desires a profit equal to a 14% rate of return on invested assets of $599,000.

a. Determine the amount of desired profit from the production and sale of 4,970 cell phones. $fill in the blank 1

b. Determine the product cost per unit for the production of 4,970 of cell phones. Round your answer to the nearest wholfill in the blank 3 %

d. Determine the selling price of cell phones. Round your answ