Variable Cost Concept of Product Pricing

Voice Com, Inc., produces and sells cellular phones. The costs of producing and selling 5,000 units of cellular phones are as follows:

Variable costs:			Fixed costs:
Direct materials	$ 95	per unit	Factory overhead	$235,500
Direct labor	44		Selling and admin. exp.	82,750
Factory overhead	29
Selling and admin. exp.	22
Total	$190	per unit

Voice Com desires a profit equal to a 15% rate of return on invested assets of $665,000.

Assume that Voice Com, Inc., uses the variable cost concept of applying the cost-plus approach to product pricing.

a. Determine the variable costs and the variable cost amount per unit for the production and sale of 5,000 units of cellular phones.

Total variable costs	$
Variable cost amount per unit	$

b. Determine the variable cost markup percentage for cellular phones. %

c. Determine the selling price of cellular phones. Round to the nearest cent. $ per phone