Question

Tidewater Company uses the product coot concept of applying the cost-plus approach to product priding The cost and expenses of roducing and selling 50,000 units of Product K are as follows: Variable costs: Direct materials Direct labor Factory overhead Selling and administrative expenses $5.00 8.50 2.50 1.00 $17.00 Total Fixed costs: Factory overhead $50,000 Selling and administrative expenses 34,000 Tidewater desires a profit equal to a 10% rate of return on invested assets of $1,285,000.

a. Determine the amount of desired profit from the production and sale of Product K s and the cost amount per unit for the production and sale of 50,000 units of Product K
b. Total manufacturing costs Cost amount per unit
c. Determine the markup percentage for Product K
d. Determine the selling price of Product K. Round your answer to two decimal places

Answer 1

Answer:

The desired profit from the sale and production of K is 10% of invested amount=10%*$1285000

             =$128500

cost per unit =$18.68

b.total manufacturing cost=$18.68*50000=$934000

cost per unit remains=$18.68

Profit per unit =$2,57

markup %=2.57/18.68=13.76%

Selling price =cost+mark up

                       =$18.68+$2.57

                        =$21.25

Explanation:

I have attached an excel file for further understanding on the formulas used above,please check out the file in order to gain  better insights into the exercise.