Twilight Lumina Company recently began production of a new product, the halogen light, which required an investment of $2,340,000 in assets. The costs of producing and selling 11,700 halogen lights are estimated as follows:

Variable costs per unit:			Fixed costs:
Direct materials	$117		Factory overhead	$468,000
Direct labor	25		Selling and admin. exp.	234,000
Factory overhead	53
Selling and admin. exp.	46
Total	$241

Twilight Lumina Company is currently considering establishing a selling price for the halogen light. The president of Twilight Lumina Company has decided to use the cost-plus approach to product pricing and has indicated that the halogen light must earn a 20% rate of return on invested assets.

Required:

Question Content Area

Note: Round all percentages to two decimal places then use in subsequent computations, if applicable. Round all dollar amounts to the nearest dollar.

1. Determine the amount of desired profit from the production and sale of the halogen light. $______

2. Assuming that the total cost concept is used, determine the following:

a. Cost amount per unit	$
b. Markup percentage		%
c. Selling price of the halogen light

3. Assuming that the product cost concept is used, determine the following:

a. Cost amount per unit
b. Markup percentage		%
c. Selling price of the halogen light

4. Assuming that the variable cost concept is used, determine the following:

a. Cost amount per unit	$
b. Markup percentage		%
c. Selling price of the halogen light

5. Assume that 6,500 units of the halogen light have been produced and sold during the current year. Analysis of the domestic market indicates that 5,200 additional units of the halogen light are expected to be sold during the remainder of the year at the normal product price determined under the total cost concept. Twilight Lumina Company received an offer from Contech Inc. for 2,000 units of the halogen light at $292.50 each. Contech Inc. will market the units in Southeast Asia under its own brand name, and no selling and administrative expenses associated with the sale will be incurred by Twilight Lumina Company. The additional business is not expected to affect the domestic sales of the halogen light, and the additional units could be produced using existing capacity.

a. Prepare a differential analysis report of the proposed sale to Contech Inc.

Twilight Lumina Company Proposal to Sell to Contech Inc. Differential Analysis Report

Differential revenue from accepting offer:	(Blank)
Revenue from sale of additional units Variable costs of additional units Revenue from sale of additional units	$
Differential cost of accepting offer:	$
Revenue from sale of additional units Variable costs of additional units Variable costs of additional units	Variable costs of additional units
Differential income (loss) from accepting offer	$