Question: Display Labs Inc recently began production of a new product

Display Labs Inc recently began production of a new product, flat panel displays, which required the investment of $1,800,000 in assets. The costs of producing and selling 9000 units of flat panel displays are as follows: Variable cost per unit, direct materials $90, direct labor $20, Factory overhead $40, Selling and administration expenses $35 totaling $185. The fixed costs are Factory overhead $360,000, selling and administration expenses $180,000. Display Labs is currently considering establishing a selling price for flat panel displays. The president of display labs has decided to use cost-plus approach to product pricing and has indicated the displays must earn a 20% rate of return on invested assets.
1. Determine the product cost concept for cost amount per unit, markup percentages, selling price of flat panel displays.
2. using the total cost concept determine the cost per unit, markup percentage rounded to two decimal places and selling price rounded to nearest whole dollar.
3. Using variable cost concept for the cost amount per unit, the markup percentage rounded two decimal places and selling price of flat panels
4. Assume that as of august 1, 2012 5000 units of flat panel displays has been produced and sold during the current year. Analysis of domestic market indicates that 4000 additional units are expected to b sold during the remainder of the year at normal product price determined under product cost concept. On Aug 3, 2012 Display labs receive an offer from Video systems for 1500 units if flat panel displays for $225 each. Video systems will market the units in Canada under its own name brand and no selling and administrative costs war associated with the sale will be incurred by display labs. The additional business is not expected to affect the domestic sales of flat panel displays and additional units could be produced using existing capacity.

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  • CreatedJuly 29, 2013
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