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eBook 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: Direct materials Direct labor Factory overhead Selling and administrative expenses Total variable cost per unit $32 12 $ 8 7 $59 Fixed costs: Factory overhead Selling and administrative expenses 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 is used, determine the following: a. Variable cost amount per unit b. Markup percentage c. Selling price per unit 5. The cost-plus approach price computed above should be viewed as a general guideline for establishing long-run normal prices; however, other considerations, such as % $180,000 80,000 % % 20160 2009-09 Seme gren S could lead management to establish a different short

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