Total Cost Method of Product Pricing
Smart Stream Inc. uses the total cost method of applying the cost-plus approach to product pricing. The costs of producing and selling 8,500 units of cell phones are as follows:
| Variable costs: | Fixed costs: | |||
| Direct materials | $ 83 | per unit | Factory overhead | $352,200 |
| Direct labor | 38 | Selling and administrative expenses | 123,800 | |
| Factory overhead | 25 | |||
| Selling and administrative expenses | 20 | |||
| Total variable cost per unit | $166 | per unit |
Smart Stream desires a profit equal to a 15% return on invested assets of $1,107,040.
a. Determine the total cost and the total cost amount per unit for the production and sale of 8,500 units of cellular phones. Round the cost per unit to two decimal places.
| Total cost | $ |
| Total cost amount per unit | $ |
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 cent.
$ per cellular phone
