Product Pricing using the Cost-Plus Approach Concepts; Differential Analysis for Accepting Additional Business

Display Labs Inc. recently began production of a new product, flat panel displays, which required the investment of $2,160,000 in assets. The costs of producing and selling 10,800 units of flat panel displays are estimated as follows:

Variable costs per unit:			Fixed costs:
Direct materials	$ 108		Factory overhead	$432,000
Direct labor	23		Selling and administrative expenses	216,000
Factory overhead	49
Selling and administrative expenses	42
Total	$222

Display Labs Inc. is currently considering establishing a selling price for flat panel displays. The president of Display Labs has decided to use the cost-plus approach to product pricing and has indicated that the displays must earn a 20% rate of return on invested assets.

Required:

Product pricing using the Cost-Plus Approach Concepts Differential Analysis for Accepting Additional Business Display Labs Inc. recently began production of a new product, flat panel displays, which required the investment of $2,160,000 in assets. The costs of producing and selling 10,800 units of flat panel displays are estimated as follows: Variable costs per unit: Fixed costs: $432,000 Direct materials 108 Factory overhead Direct labor 23 Selling and administrative expenses 216,000 Factory overhead 49 Selling and administrative expenses 42 Total $222 Display Labs Inc. is currently considering establishing a selling price for flat panel displays. The president of Display Labs has decided to use the cost-plus approach to product pricing and has indicated that the displays must earn a 20% rate of return on invested assets. Required: Hint(s) Note: Round all markup percentages to two decimal places. If required, round all costs per unit and selling prices per unit to the nearest cent. 1. Determine the amount of desired profit from the production and sale of flat panel displays. 43200C 2. Assuming that the product cost concept is used, determine the following: a. The cost amount per unit. b. The markup percentage. c. The selling price of flat panel displays. a. Cost amount per unit 242 b. Markup Percentage 48.30 C. Selling price per unit