Smart Stream Inc. uses the variable cost concept of applying the cost-plus approach to product pricing. The costs of producing and selling 5,000 units of cellular phones are as follows: Variable costs: Fixed costs: Direct materials $ 60 per unit Factory overhead $144,300 Direct labor 28 Selling and admin. exp. 50,700 Factory overhead 18 Selling and admin. exp. 14 Total $120 per unit Smart Stream wants a profit equal to a 15% rate of return on invested assets of $420,000. a. Determine the variable costs and the variable cost amount per unit for the production and sale of 5,000 units of cellular phones. Round to two decimal places. Total variable costs $fill in the blank 1 Variable cost amount per unit $fill in the blank 2 b. Determine the variable cost markup percentage for cellular phones. fill in the blank 3 % c. Determine the selling price of cellular phones. Round to the nearest cent. $fill in the blank 4 per cellular phone
Variance Analysis
In layman's terms, variance analysis is an analysis of a difference between planned and actual behavior. Variance analysis is mainly used by the companies to maintain a control over a business. After analyzing differences, companies find the reasons for the variance so that the necessary steps should be taken to correct that variance.
Standard Costing
The standard cost system is the expected cost per unit product manufactured and it helps in estimating the deviations and controlling them as well as fixing the selling price of the product. For example, it helps to plan the cost for the coming year on the various expenses.
Variable Cost Concept of Product Pricing
Smart Stream Inc. uses the variable cost concept of applying the cost-plus approach to product pricing. The costs of producing and selling 5,000 units of cellular phones are as follows:
| Variable costs: | Fixed costs: | |||
| Direct materials | $ 60 | per unit | Factory |
$144,300 |
| Direct labor | 28 | Selling and admin. exp. | 50,700 | |
| Factory overhead | 18 | |||
| Selling and admin. exp. | 14 | |||
| Total | $120 | per unit |
Smart Stream wants a profit equal to a 15% rate of
a. Determine the variable costs and the variable cost amount per unit for the production and sale of 5,000 units of cellular phones. Round to two decimal places.
| Total variable costs | $fill in the blank 1 |
| Variable cost amount per unit | $fill in the blank 2 |
b. Determine the variable cost markup percentage for cellular phones.
fill in the blank 3 %
c. Determine the selling price of cellular phones. Round to the nearest cent.
$fill in the blank 4 per cellular phone
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