Variable Cost Method of Product Pricing

Smart Stream Inc. uses the variable cost method of applying the cost-plus approach to product pricing. The costs of producing and selling 10,000 cell phones are as follows:

Variable costs per unit:						Fixed costs:
	Direct materials		$150				Factory overhead	$350,000
	Direct labor		25				Selling and admin. exp.	140,000
	Factory overhead		40
	Selling and administrative expenses		25
		Total variable cost per unit	$240

Smart Stream desires a profit equal to a 30% return on invested assets of $1,200,000.

a. Determine the variable costs and the variable cost amount per unit for the production and sale of 10,000 cellular phones.

Total variable costs	$
Variable cost amount per unit	$

b. Determine the variable cost markup percentage for cellular phones. Round to two decimal places. %

c. Determine the selling price of cellular phones. If required, round to the nearest dollar. $ per cellular phone