Product Pricing Using the Cost-Plus Approach Concepts; Differential Analysis Report for Accepting Additional Business Twilight...
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Product Pricing Using the Cost-Plus Approach Concepts; Differential Analysis Report for Accepting Additional Business Twilight Lumina Company recently began production of a new product, the halogen light, which required an investment of $2,160,000 in assets. The costs of producing and selling 10,800 halogen lights are estimated as follows: Variable costs per unit: Fixed costs: Direct materials $108 Factory overhead $432,000 Direct labor 23 Selling and admin. exp. 216,000 Factory overhead 49 Selling and admin. exp. 42 Total $222 Twilight Lumina Company is currently considering establishing a selling price for the halogen light. The president of Twilight Lumina Company has decided to use the cost-plus approach to product pricing and has indicated that the halogen light must earn a 20% rate of return on invested assets.
4. Assuming that the variable cost concept is used, determine the following:
a. Cost amount per unit
B.Markup percentage
%
c. Selling price of the halogen light
5. Comment on any additional considerations that could influence establishing the selling price for the halogen light.
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