Smart Stream Inc. uses the product cost method of applying the cost-plus approach to product pricing. The costs of producing and selling 10,000 cell phones are as follows:
Variable costs per unit: Fixed costs:
Direct materials $150 Factory overhead $350,000
Direct labor 25 Selling and administrative expenses 140,000
Factory overhead 40
Selling and administrative expenses 25
Total $240 per unit
Smart Stream desires a profit equal to a 30% rate of return on invested assets of $1,200,000.
a. Determine the amount of desired profit from the production and sale of 10,000 cellular phones.
b. Determine the product cost and the cost amount per unit for the production of 10,000 cellular phones.
c. Determine the product cost markup percentage for cellular phones.
d. Determine the selling price of cellular phones.