Assignment:
Display Labs Inc. recently began production of a new product, flat panel displays, which required the investment of $2,500,000 in asests. The costs of producing and selling 25,000 units of flat panel displays are estimated as follows:
Variable cost per unit: Fixed Cost:
Direct materials $170 Factory overhead $1,500,000
Direct labor $40 Selling + Administrative cost $500,000
Factory overhead $50
Selling and administrative expenses $20
TOTAL =$280
Display Labs Inc. is currently considering establishing a selling price for flat panel displays. The president of Display Labs has decided to use cost-plus approach to product pricing and has indicated that the displays must earn an 18% rate of return on invested asests.
INSTRUCTIONS:
Q1. Determine the amount of desired profit from the production and sale of flat panel displays.
Q2. Assuming that the TOTAL cost concept is used determine (A) the cost amount per unit, (B) the markup percentage, and (C) the selling price of flat panel displays.
Q3. Assuming that the PRODUCT cost concept is used determine (A) the cost amount per unit, (B) the markup percentage, and (C) the selling price of flat panel displays.
Q4. Assuming that the VARIABLE cost concept is used determine (A) the cost amount per unit, (B) the markup percentage, and (C) the selling price of flat panel displays