Good Inc. recently began production of a new product, a digital watch, which required the investment of
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| Good Inc. recently began production of a new product, a digital watch, which required the investment of $1,800,000 in assets. The costs of producing and selling 80,000 units of the digital watch are estimated as follows: | ||||||
| Variable Costs: | Per Unit | |||||
| Direct Materials | $ 10.00 | |||||
| Direct Labor | $ 6.00 | |||||
| Factory Overhead | $ 4.00 | |||||
| Selling and Admin Expenses | $ 5.00 | |||||
| Total | $ 25.00 | |||||
| Fixed Costs: | ||||||
| Factory Overhead | $ 800,000 | |||||
| Selling and Admin Expenses | $ 400,000 | |||||
| Good Inc. is currently considering establishing a selling price for the digital watch. The president of Good Inc. has decided to use the cost-plus approach to product pricing and has indicated that the digital watch must earn a 10% rate of return on invested assets. | ||||||
| Determine the measures assuming that the product cost concept is used: | ||||||
| The amount of desired profit from the production and sale of the digital watch. | ||||||
| The cost amount per unit | ||||||
| The markup percentage | ||||||
| The selling price of the digital watch. | ||||||
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