PR 25-5A Product pricing using the cost-plus approach concepts;differential analysis for accepting additional businessOBJ. 1, 2Crystal Displays 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 selling5,000 units of flat panel displays are estimated as follows:Variable costs per unit:Fixed costs:Factory overheadSelling and administrative expensesDirect materials$120$250,000Direct labor30150,000Factory overhead50Selling and administrative expenses35Total$235Crystal Displays Inc. is currently considering establishing a selling price for flat panel dis-plays. The president of Crystal Displays has decided to use the cost-plus approach to productpricing and has indicated that the displays must earn a 15% rate of return on invested assets.Instructions1. 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 perunit, (b) the markup percentage, and (c) the selling price of flat panel displays.Warren, C. S., Jonick, C. A., & Schneider, J. S., (2021). Accounting (28 ed.). Boston, MA: Cengage. Question 1Answer:Question 2aTotal Manufacturing Costs:VariableFixed Factory OverheadTotalCost Per UnitbMarkup Percentage%Seling Price

The total cost of all resources utilized in the production of a product is known as the manufacturing cost. The three forms of production expenses are direct materials costs, direct labor costs, and manufacturing overhead costs.Answer 1) Desired profit = 15% rate of return on invested asset = 15% x 1,500,000 = $225,000Answer 2) a) Particulars Amount Cost Direct Material 120 Direct labor 30 Factory Overhead 50 Selling and administrative expenses 35 Total Variable cost per unit 235 b) Markup percentage =Desired profitTotal Cost x 100 Total variable cost = 5,000 x $235 = $1,175,000 Total Fixed cost = 250,000 + 150,000 = $400,000 Total Cost = $1,575,000 Markup percentage = 225,0001,575,000 x 100 = 14.29% c) Selling price = Total Cost + Mark up =$1,575,0005,000+ 14.29% of total cost per unit = $315 + 14.29% of $315 = $315 + $45.01 = $360.01

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PR 25-5A Product pricing using the cost-plus approach concepts; differential analysis for accepting additional business Crystal Displays Inc. recently began production of a new product, flat panel disp which required the investment of $1,500,000 in assets. The costs of producing and se 5,000 units of flat panel displays are estimated as follows: OBJ Wariable costs per unit: Fixed costs: Factory overhead Selling and administrative expenses Direct materials $120 $250, Direct labor 30 150, Factory overhead Selling and administrative expenses 50 35 Total $235

PR 25-5A Product pricing using the cost-plus approach concepts; differential analysis for accepting additional business Crystal Displays Inc. recently began production of a new product, flat panel disp which required the investment of $1,500,000 in assets. The costs of producing and se 5,000 units of flat panel displays are estimated as follows: OBJ Wariable costs per unit: Fixed costs: Factory overhead Selling and administrative expenses Direct materials $120 $250, Direct labor 30 150, Factory overhead Selling and administrative expenses 50 35 Total $235

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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