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 $ 70 per unit Factory overhead $194,300 Direct labor 32 Selling and admin. exp. 68,200 Factory overhead 21 Selling and admin. exp. 17 Total $140 per unit Smart Stream wants a profit equal to a 15% rate of return on invested assets of $490,000. 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 Variable cost amount per unit b. Determine the variable cost markup percentage for cellular phones. % c. Determine the selling price of cellular phones. Round to the nearest cent. per cellular phone

FINANCIAL ACCOUNTING
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Chapter1: Financial Statements And Business Decisions
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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
$ 70 per unit
Factory overhead
$194,300
Direct labor
32
Selling and admin. exp.
68,200
Factory overhead
21
Selling and admin. exp.
17
Total
$140 per unit
Smart Stream wants a profit equal to a 15% rate of return on invested assets of $490,000.
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
Variable cost amount per unit
b. Determine the variable cost markup percentage for cellular phones.
%
c. Determine the selling price of cellular phones. Round to the nearest cent.
per cellular phone
Transcribed Image Text: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 $ 70 per unit Factory overhead $194,300 Direct labor 32 Selling and admin. exp. 68,200 Factory overhead 21 Selling and admin. exp. 17 Total $140 per unit Smart Stream wants a profit equal to a 15% rate of return on invested assets of $490,000. 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 Variable cost amount per unit b. Determine the variable cost markup percentage for cellular phones. % c. Determine the selling price of cellular phones. Round to the nearest cent. per cellular phone
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