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 $1,500,000 in assets. The costs of producing and selling 5,000 units of flat panel displays are estimated as follows: $120 Variable costs per unit: Direct materials Direct labor Factory overhead Selling and administrative expenses Total variable cost per unit Fixed costs: Factory overhead Selling and administrative expenses $250,000 150,000 30 50 35 $235 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: 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 flat panel displays. $ 225,000 2. Assuming that the product cost method is used, determine the following: 2. Assuming that the product cost method is used, determine the following: a. Product cost amount per unit $ 250 b. Markup percentage 18 X % C. Selling price per unit 45 X 3. (Appendix) Assuming that the total cost method is used, determine the following: a. Total cost amount per unit 315 b. Markup percentage 14 x % c. Selling price per unit 45 X 4. (Appendix) Assuming that the variable cost method is used, determine the following: a. Variable cost amount per unit $ 235 b. Markup percentage 19 X % C. Selling price per unit 360 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 economic conditions of the marketplace could lead management to establish a different short-run price.