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Product Pricing using the Cost-Plus Approach Concepts Differential Analysis for Accepting Additional Business Display Labs Inc. recently began production of a new product, flat panel
Product Pricing using the Cost-Plus Approach Concepts Differential Analysis for Accepting Additional Business Display Labs Inc. recently began production of a new product, flat panel displays, which required the investment of $1,620,000 in assets. The costs of producin and selling 8,100 units of flat panel displays are estimated as follows: Variable costs per unit: Fixed costs: Direct materials 81 Factory overhead $324,000 Direct labor Selling and administrative expenses 18 162,000 Factory overhead 36 Selling and administrative expenses 32 Total $167 Display Labs Inc. is currently considering establishing a selling price for flat panel displays. The president of Display Labs has decided to use the cost-plus approach to product pricing and has indicated that the displays must earn a 20% rate of 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 cent. 1. Determine the amount of desired profit from the production and sale of flat panel displays. 2. Assuming that the product cost concept is used, determine the following a. The cost amount per unit. b. The markup percentage c. The selling price of flat panel displays a. Cost amount per unit b. Markup Percentage C. Selling price per unit 3. Appendix Assuming that the total.cost.concept is used, determine the following a. The cost amount per unit. b. The markup percentage. c. The selling price of flat panel displays, a. Cost amount per unit b. Markup Percentage C. Selling price per unit
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