Chapter 10, Problem 1AA

Assume Apple is designing a new smartphone. Each unit of this new phone is expected to require $230 of direct materials. $10 of direct labor, $20 of variable overhead, and $20 of variable selling administrative costs.

Required
1. If Apple uses the variable cost method lo set selling prices and plans a markup of 200%of variablecosts, what is the expected selling price per unit of this new phone?
2. Assume that Apple is a ‘"price-taker” and the market sales price for this type of phone is $800 per unit. Compute Apple's target cost if the company desires a profit of 60% of sales price.