Crystal Displays Inc. recently began production of a new product, flat panel displays, which required the investment of $1,300,000 in assets. The costs of producing and selling 5,000 units of flat panel displays are estimated as follows: 1 Variable costs per unit: 2 Direct materials $121.00 3 Direct labor 28.00 4 Factory overhead 49.00 5 Selling and administrative expenses 37.00 6 Total $235.00 7 Fixed costs: 8 Factory overhead $254,000.00 9 Selling and administrative expenses 147,000.00
Crystal Displays Inc. is currently considering establishing a selling price for flat panel displays. The president of Crystal Displays has decided to use the cost-plus approach to product pricing and has indicated that the displays must earn a 12% rate of return on invested assets. 1. Determine the amount of desired profit from the production and sale of flat panel displays.
2. Assuming that the product cost concept is used, determine (a) the cost amount per unit, (b) the markup percentage (rounded to two decimal places), and (c) the selling price of flat panel displays.
Cost amount per unit Markup percentage % Selling price
3. (Appendix) Assuming that the total cost concept is used,determine (a) the cost amount per unit, (b) the markup percentage (rounded to two decimal places), and (c) the selling price of flat panel displays.
Cost amount per unit Markup percentage % Selling price
4. (Appendix) Assuming that the variable cost concept is used, determine (a) the cost amount per unit, (b) the markup percentage (rounded to two decimal places), and (c) the selling price of flat panel displays.
Cost amount per unit Markup percentage % Selling price
5. Comment on any additional considerations that could influence establishing the selling price for flat panel displays.
The cost-plus approach price of $360_should/should not____ be viewed as a general guideline for establishing long-run normal prices. Other considerations, such as the price of competing products and general economic conditions of the marketplace, __(could/will)______ lead management to establish a short-run price more or less than $360.
| 1 | Variable costs per unit: | |
| 2 | Direct materials | $121.00 |
| 3 | Direct labor | 28.00 |
| 4 | Factory overhead | 49.00 |
| 5 | Selling and administrative expenses | 37.00 |
| 6 | Total | $235.00 |
| 7 | Fixed costs: | |
| 8 | Factory overhead | $254,000.00 |
| 9 | Selling and administrative expenses | 147,000.00 |
1. Determine the amount of desired profit from the production and sale of flat panel displays.
2. Assuming that the product cost concept is used, determine (a) the cost amount per unit, (b) the markup percentage (rounded to two decimal places), and (c) the selling price of flat panel displays.
| Cost amount per unit | |
| Markup percentage | % |
| Selling price |
3. (Appendix) Assuming that the total cost concept is used,determine (a) the cost amount per unit, (b) the markup percentage (rounded to two decimal places), and (c) the selling price of flat panel displays.
| Cost amount per unit | |
| Markup percentage | % |
| Selling price |
4. (Appendix) Assuming that the variable cost concept is used, determine (a) the cost amount per unit, (b) the markup percentage (rounded to two decimal places), and (c) the selling price of flat panel displays.
| Cost amount per unit | |
| Markup percentage | % |
| Selling price |
5. Comment on any additional considerations that could influence establishing the selling price for flat panel displays.
The cost-plus approach price of $360_should/should not____ be viewed as a general guideline for establishing long-run normal prices. Other considerations, such as the price of competing products and general economic conditions of the marketplace, __(could/will)______ lead management to establish a short-run price more or less than $360.
Related questions
Crystal Displays Inc. recently began production of a newproduct, flat panel displays, which required the investment of$1,500,000 in assets. The costs of producing and selling 5,000units of flat panel displays are estimated as follows:
1 | Variable costs per unit: | |
2 | Direct materials | $119.00 |
3 | Direct labor | 32.00 |
4 | Factory overhead | 52.00 |
5 | Selling and administrative expenses | 36.00 |
6 | Total variable cost per unit | $239.00 |
7 | Fixed costs: | |
8 | Factory overhead | $245,000.00 |
9 | Selling and administrative expenses | 147,000.00 |
Crystal Displays Inc. is currently considering establishing aselling price for flat panel displays. The president of CrystalDisplays has decided to use the cost-plus approach to productpricing and has indicated that the displays must earn a 17% returnon invested assets.
1. Determine the amount of desired profit from the productionand sale of flat panel displays.
2. Assuming that the product cost method is used, determine (a)the cost amount per unit, (b) the markup percentage, and (c) theselling price of flat panel displays. Round your markup percentageand selling price to two decimal places.
| Cost amount per unit | |
| Markup percentage | % |
| Selling price |
3. (Appendix) Assuming that the total cost method is used,determine (a) the cost amount per unit, (b) the markup percentage,and (c) the selling price of flat panel displays. Round your markuppercentage and selling price to two decimal places.
| Cost amount per unit | |
| Markup percentage | % |
| Selling price |
4. (Appendix) Assuming that the variable cost method is used,determine (a) the cost amount per unit, (b) the markup percentage,and (c) the selling price of flat panel displays. Round your markuppercentage and selling price to two decimal places.
| Cost amount per unit | |
| Markup percentage | % |
| Selling price |
5. Comment on any additional considerations that could influenceestablishing the selling price for flat panel displays.
The cost-plus approach price computed above should be viewed asa general guideline for establishing long-run normal prices;however, other considerations, such as , could lead management toestablish a different short-run price.
6a. Prepare a differential analysis of the proposed sale toMaple Leaf Visual Inc. Refer to the lists of Labels and AmountDescriptions for the exact wording of the answer choices for textentries. For those boxes in which you must enter subtracted ornegative numbers use a minus sign. If there is no amount or anamount is zero, enter รขยย0รขยย. A colon (:) will automatically appear ifrequired.
Differential Analysis |
Reject (Alternative 1) or Accept (Alternative 2) Order |
August 3 |
1 | Reject Order | Accept Order | Differential Effect on Income | |
2 | (Alternative 1) | (Alternative 2) | (Alternative 2) | |
3 | ||||
4 | ||||
5 | ||||
6 |
6b. Based on the differential analysis in part (a), should theproposal be accepted?
The company is indifferent since the result is the sameregardless of which alternative is chosen.
Yes
No
Voice Com, Inc., uses the product cost concept of applying the cost-plus approach to product pricing. The costs of producing and selling 5,070 units of cell phones are as follows:
| Variable costs: | Fixed costs: | |||||||
| Direct materials | $89 | per unit | Factory overhead | $198,300 | ||||
| Direct labor | 33 | Selling and admin. exp. | 71,800 | |||||
| Factory overhead | 27 | |||||||
| Selling and admin. exp. | 22 | |||||||
| Total variable cost per unit | $171 | per unit | ||||||
Voice Com desires a profit equal to a 14% rate of return on invested assets of $598,500.
a. Determine the amount of desired profit from the production and sale of 5,070 units of cell phones.
$
b. Determine the product cost per unit for the production of 5,070 of cell phones. If required, round your answer to nearest dollar.
$ per unit
c. Determine the product cost markup percentage (rounded to two decimal places) for cell phones.
%
d. Determine the selling price of cell phones. Round to the nearest dollar.
Cost: $____per unit
Markup $____per unit
Selling price $_____per unit
