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

Twilight Lumina Company recently began production of a new product, the halogen light, which required an investment of $1,620,000 in assets. The costs of producing and selling 8,100 halogen lights are estimated as follows:

Variable costs per unit: Fixed costs: Direct materials$81 Factory overhead$324,000Direct labor18 Selling and admin. exp.162,000Factory overhead36 Selling and admin. exp.32 Total$167

Twilight Lumina Company is currently considering establishing a selling price for the halogen light. The president of Twilight Lumina Company has decided to use the cost-plus approach to product pricing and has indicated that the halogen light must earn a 20% rate of return on invested assets.

Required:

Question Content Area

Note: Round all percentages to two decimal places then use in subsequent computations, if applicable. Round all dollar amounts to the nearest dollar.

1. Determine the amount of desired profit from the production and sale of the halogen light. $fill in the blank ba407b010058fdf_1

2. Assuming that the total cost concept is used, determine the following:

a. Cost amount per unit$fill in the blank ba407b010058fdf_2 b. Markup percentagefill in the blank ba407b010058fdf_3%c. Selling price of the halogen light$fill in the blank ba407b010058fdf_4

3. Assuming that the product cost concept is used, determine the following:

a. Cost amount per unit$fill in the blank ba407b010058fdf_5 b. Markup percentagefill in the blank ba407b010058fdf_6%c. Selling price of the halogen light$fill in the blank ba407b010058fdf_7

4. Assuming that the variable cost concept is used, determine the following:

a. Cost amount per unit$fill in the blank ba407b010058fdf_8 b. Markup percentagefill in the blank ba407b010058fdf_9%c. Selling price of the halogen light$fill in the blank ba407b010058fdf_10

5. Comment on any additional considerations that could influence establishing the selling price for the halogen light.