Diamond Visual Entertainment Inc. recently began production of a new product, flat panel displays, which required the investment of $1,500,000 in assets. The costs of producing and selling 5,000 units of flat panel displays are estimated as follows: Variable Costs: Variable Cost Amount: Fixed Costs: Fixed Cost Amount: Direct materials $120 Factory overhead $240,000 Direct labor 35 Selling and admin expenses 150,000 Variable overhead 52 Total Fixed costs 390,000 Selling and admin expenses 38 Total variable costs 245 Diamond Visual Entertainment Inc. is currently considering establishing a selling price for flat panel displays. The president of Diamond Visual Entertainment has decided to use the cost-plus approach to product pricing and has indicated that the displays must earn a 17% return on invested assets. A. Assuming that the variable cost method is used, determine: i. the cost amount per unit, ii. the markup percentage (rounded to two decimal places), and iii. the selling price of flat panel displays. (Round markup to nearest whole dollar.)
Diamond Visual Entertainment Inc. recently began production of a new product, flat panel displays, which required the investment of $1,500,000 in assets. The costs of producing and selling 5,000 units of flat panel displays are estimated as follows: Variable Costs: Variable Cost Amount: Fixed Costs: Fixed Cost Amount: Direct materials $120 Factory overhead $240,000 Direct labor 35 Selling and admin expenses 150,000 Variable overhead 52 Total Fixed costs 390,000 Selling and admin expenses 38 Total variable costs 245 Diamond Visual Entertainment Inc. is currently considering establishing a selling price for flat panel displays. The president of Diamond Visual Entertainment has decided to use the cost-plus approach to product pricing and has indicated that the displays must earn a 17% return on invested assets. A. Assuming that the variable cost method is used, determine: i. the cost amount per unit, ii. the markup percentage (rounded to two decimal places), and iii. the selling price of flat panel displays. (Round markup to nearest whole dollar.)
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
Diamond Visual Entertainment Inc. recently began production of a new product, flat panel displays, which required the investment of $1,500,000 in assets. The costs of producing and selling 5,000 units of flat panel displays are estimated as follows:
|
Variable Costs: |
Variable Cost Amount: |
Fixed Costs: |
Fixed Cost Amount: |
|
Direct materials |
$120 |
Factory overhead |
$240,000 |
|
Direct labor |
35 |
Selling and admin expenses |
150,000 |
|
Variable overhead |
52 |
Total Fixed costs |
390,000 |
|
Selling and admin expenses |
38 |
|
|
|
Total variable costs |
245 |
|
|
Diamond Visual Entertainment Inc. is currently considering establishing a selling price for flat panel displays. The president of Diamond Visual Entertainment has decided to use the cost-plus approach to product pricing and has indicated that the displays must earn a 17% return on invested assets.
A. Assuming that the variable cost method is used, determine:
i. the cost amount per unit,
ii. the markup percentage (rounded to two decimal places), and
iii. the selling price of flat panel displays. (Round markup to nearest whole dollar.)
B. Comment on any additional considerations that could influence establishing the selling price for flat panel displays.
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