Product Pricing using the Cost Plus Approach Methods: Differential Analysis for Accepting Additional Business Crystal Displays Inc. recently began production of a new product, flat panel displays, which required the investment of $3,500,000 in assets. The cost of producing and sailing 5,000 units of flat panel displays are estimated as follows: Variable costs per unit: Direct materials $120 Fixed costs: Factory overhead Selling and administrative expenses $250,000 150,000 Direct labor Factory overhead Selling and administrative expenses Total variable cost per unit 30 50 35 5235 Crystal Displays Inc. is currently considering establishing a selling price for fiat 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: Note: Round all marsip 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 flat panel displays 2. Assuming that the product cout method used determine the following a. Product cost amount per unit b. Markup percentage e. Selling price per unit 3. Appendix) Assuming that the total cost method is used determine the following Total cost amount per unit b. Markup percentage Selling price per unit 4. bendix Assuming that the method is used determine the follow Selling price per unit 4. Appendix) Assuming that the variable cont method is used, determine the following: a Variable cost amount per un D. Markup percentage Selling price per unit 5. The cost-plus approach price computed above thould be viewed as a general qaldene for stabilihing long-run normal prices; however, other consideration such as could lead management to establish a different short-run price 6. Asume that as of August 1, 3,000 units of rat panel displays have been produced and solduring the current year, Analyes of the domestic market indicates that 3,000 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 1, Crystal Dinlays Inc. received an offer from Maple Leaf Visual Inc. for 300 units of het panel displays at 8225 each. Maple Leaf Visual Ints will market the units in Canada under its own brand name, and no variable in and administrative expenses associated with the sale will be incurred by Crystal Displays Inc. The additional business mot spected to affect the domestic sales of the people and the additional units could be produced in existing factory, seting and administrative capacity Prepare teretes the proposed cale to Maple Leat visual in 2 mozte zero, entero Differential Analysis Reject (Alt. 1) or Accept (Art. 2) Order August 3 Reject Accept Differential Order Order Effects (Alternative 1) (Alternative 2) (Alternative 2) Revenue Costs Variable manang costs D. Based on the recally in part(s), the proposal be accept>
