Product pricing using the cost$-$plus approach methods; Differential analysis for accepting additional business

Digital Displays Inc. recently began production of a new product, flat panel displays, which required the investment of $$6,000,000$ in assets. The costs of

producing and selling $20,000$ units of flat panel displays are estimated as follows:

Variable costs per unit:

Fixed costs:

Factory overhead

$$1,000,000$

Selling and administrative expenses $400,000$

Digital Displays Inc. is currently considering establishing a selling price for flat panel displays. The president of Digital Displays has decided to use the cost$-$plus

approach to product pricing and has indicated that the displays must earn a $15\%$ 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.

Determine the amount of desired profit from the production and sale of flat panel displays.

$

Assuming that the product cost method is used, determine the following:

a$.$ Cost amount per unit

b$.$ Markup percentage

c$.$ Selling price per unit

$($Appendix$)$ Assuming that the total cost method is used, determine the following:

a$.$ Cost amount per unit

b$.$ Markup percentage

$\%$

c$.$ Selling price per unit

$($Appendix$)$ Assuming that the variable cost method is used, determine the following:

a$.$ Variable cost amount per unit

b$.$ Markup percentage

$s$

$s$

c$.$ Selling price per unit

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

$,$ could lead management to establish a different short$-$run price.