Question - Brayton Inc. uses the product cost concept of applying the cost-plus approach to product pricing. The costs of producing and selling 5,000 units of cellular phones are as follows:
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Variable Costs:
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Fixed Costs:
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Direct materials
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$625,000
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Factory overhead
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$215,000
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Direct labor
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225,000
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Selling & Admin. expenses
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75,000
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Factory Overhead
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200,000
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Selling & admin. Exp.
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150,000
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$1,200,000
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Brayton desires a profit equal to a 25% rate of return on invested assets of $500,000.
Required:
a) Determine the amount of desired profit.
b) Determine the product cost per unit for the production of 5,000 phones.
c) Determine the total cost markup percentage (e.g. 20%) using the product cost concept.
d) Determine the selling price of each cellular phone. Round to nearest dollar.