Night Glow Inc. recently began production of a new product, the halogen light, which required the investment of $600,000 in assets. The costs of producing and selling 10,000 halogen lights are estimated as follows: Variable costs per unit: Fixed costs: Direct materials $32 Factory overhead $180,000 Direct labor 12 Selling and administrative expenses 80,000 Factory overhead 8 Selling and administrative expenses 7 Total variable cost per unit $59 Night Glow Inc. is currently considering establishing a selling price for the halogen light. The president of Night Glow Inc. has decided to use the cost-plus approach to product pricing and has indicated that the halogen light must earn a 10% return on invested assets. Required: Note: Round all markup percentages to two decimal places, if required. Round all costs per unit and selling prices per unit to the nearest whole dollar. 1. Determine the amount of desired profit from the production and sale of the halogen light. $ 2. Assuming that the product cost method is used, determine the following: a. Product Cost amount per unit $ b. Markup percentage % c. Selling price per unit $ 3. (Appendix) Assuming that the total cost method is used, determine the following: a. Total Cost amount per unit $ b. Markup percentage % c. Selling price per unit $ 4. (Appendix) Assuming that the variable cost method i

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

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Product Pricing using the Cost-Plus Approach Methods; Differential Analysis for Accepting Additional Business

Night Glow Inc. recently began production of a new product, the halogen light, which required the investment of $600,000 in assets. The costs of producing and selling 10,000 halogen lights are estimated as follows:

Variable costs per unit:		Fixed costs:
Direct materials	$32	Factory overhead	$180,000
Direct labor	12	Selling and administrative expenses	80,000
Factory overhead	8
Selling and administrative expenses	7
Total variable cost per unit	$59

Night Glow Inc. is currently considering establishing a selling price for the halogen light. The president of Night Glow Inc. has decided to use the cost-plus approach to product pricing and has indicated that the halogen light must earn a 10% return on invested assets.

Required:

Note: Round all markup percentages to two decimal places, if required. Round all costs per unit and selling prices per unit to the nearest whole dollar.

1. Determine the amount of desired profit from the production and sale of the halogen light.
$

2. Assuming that the product cost method is used, determine the following:

a. Product Cost amount per unit	$
b. Markup percentage		%
c. Selling price per unit	$

3. (Appendix) Assuming that the total cost method is used, determine the following:

a. Total Cost amount per unit	$
b. Markup percentage		%
c. Selling price per unit	$

4. (Appendix) Assuming that the variable cost method i

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