Question - Total Cost Concept of Product Pricing
Smart Stream Inc. uses the total cost concept of applying the cost-plus approach to product pricing. The costs of producing and selling 10,000 cellular phones are as follows:
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Variable costs per unit:
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Fixed costs:
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Direct materials
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$150
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Factory overhead
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$350,000
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Direct labor
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25
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Selling and admin. exp.
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140,000
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Factory overhead
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40
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Selling and administrative expenses
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25
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Total
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$240
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Smart Stream desires a profit equal to a 30% rate of return on invested assets of $1,200,000.
a. Determine the total costs and the total cost amount per unit for the production and sale of 10,000 cellular phones.
b. Determine the total cost markup percentage (rounded to two decimal places) for cellular phones.
c. Determine the selling price of cellular phones. Round to the nearest dollar.