Smart Stream Inc. uses the variable 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 admin. exp. 140,000 Factory overhead 40 Selling and administrative expenses 25 Total variable cost per unit $240 Smart Stream desires a profit equal to a 30% return on invested assets of $1,200,000.
Required:
a. Determine the variable costs and the variable cost amount per unit for the production and sale of 10,000 cellular phones.
b. Determine the variable cost markup percentage for cellular phones.
c. Determine the selling price of cellular phones. If required, round to the nearest dollar.
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