RooPhone Inc. uses the product 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: (6 points)<?xml:namespace prefix = o ns = “urn:schemas microsoft com:office:office” />
Variable costs Fixed Costs:
Direct materials $625,000 Factory overhead $215,000
Direct labor 225,000 Selling & Admin. expenses 75,000
Factory Overhead 200,000
Selling & admin. Exp. 150,000
$1,200,000
RooPhone desires a profit equal to a 25% rate of return on invested assets of $400,000.
a.) Determine the amount of desired profit.
b.) Determine the product cost per unit for the production of 5,000 phones.
c.) Determine the total cost markup percentage (rounded to 2 decimal places) using the product cost concept.
d.) Determine the selling price of each cellular phone. Round to nearest dollar.