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 $2,340,000 in assets. The costs of producing and selling 11,700 halogen lights are estimated as follows:

Variable costs per unit:			Fixed costs:
Direct materials	$117		Factory overhead	$468,000
Direct labor	25		Selling and admin. exp.	234,000
Factory overhead	53
Selling and admin. exp.	46
Total	$241

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.

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

a. cost amount per unit

b. mark up percentage

c. selling price of halogen light

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

a. cost amount per unit

b. mark up percentage

c. selling price of halogen light