Product Pricing using the Cost-Plus Approach Concepts; Differential Analysis for Accepting Additional Business Crystal Displays Inc. recently began production of a new product, flat panel displays, which required the investment of $1,620,000 in assets. The costs of producing and selling 8,100 units of flat panel displays are estimated as follows: Variable costs per unit: Fixed costs: Direct materials $81 Factory overhead $324,000 Direct labor 18 Selling and administrative expenses 162,000 Factory overhead 36 Selling and administrative expenses 32 Total $167 Crystal Displays Inc. is currently considering establishing a selling price for flat panel displays. The president of Crystal Displays 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: Question Content Area Note: Round all markup percentages to two decimal places. Round all costs per unit and selling prices per unit to the nearest whole dollar. 1. Determine the amount of desired profit from the production and sale of flat panel displays. $fill in the blank f36556f4e023fae_1 2. Assuming that the product cost concept is used, determine the following: The cost amount per unit. The markup percentage. the selling price of flat panel displays. a. Cost amount per unit $fill in the blank f36556f4e023fae_2 b. Markup percentage fill in the blank f36556f4e023fae_3
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Product Pricing using the Cost-Plus Approach Concepts; Differential Analysis for Accepting Additional Business
Crystal Displays Inc. recently began production of a new product, flat panel displays, which required the investment of $1,620,000 in assets. The costs of producing and selling 8,100 units of flat panel displays are estimated as follows:
Variable costs per unit: Fixed costs: Direct materials $81 Factory overhead $324,000 Direct labor 18 Selling and administrative expenses 162,000 Factory overhead 36 Selling and administrative expenses 32 Total $167 Crystal Displays Inc. is currently considering establishing a selling price for flat panel displays. The president of Crystal Displays 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:
Question Content Area
Note: Round all markup percentages to two decimal places. Round all costs per unit and selling prices per unit to the nearest whole dollar.
1. Determine the amount of desired profit from the production and sale of flat panel displays.
$fill in the blank f36556f4e023fae_12. Assuming that the product cost concept is used, determine the following:
- The cost amount per unit.
- The markup percentage.
- the selling price of flat panel displays.
a. Cost amount per unit $fill in the blank f36556f4e023fae_2 b. Markup percentage fill in the blank f36556f4e023fae_3 % c. Selling price per unit $fill in the blank f36556f4e023fae_4 3. Appendix Assuming that the total cost concept is used, determine the following:
- The cost amount per unit.
- The markup percentage.
- The selling price of flat panel displays.
a. Cost amount per unit $fill in the blank f36556f4e023fae_5 b. Markup percentage fill in the blank f36556f4e023fae_6 % c. Selling price per unit $fill in the blank f36556f4e023fae_7 4. Appendix Assuming that the variable cost concept is used, determine the following:
- The cost amount per unit.
- The markup percentage.
- The selling price of flat panel displays.
a. Variable cost amount per unit $fill in the blank f36556f4e023fae_8 b. Markup percentage fill in the blank f36556f4e023fae_9 % c. Selling price per unit $fill in the blank f36556f4e023fae_10 5. The cost-plus approach price
be viewed as a general guideline for establishing long-run normal prices. Other considerations, such as the price of competing products and general economic conditions of the marketplace,
lead management to establish a short-run price more or less than the cost-plus approach price.
Question Content Area
Differential AnalysisReject Order (Alt. 1) or Accept Order (Alt. 2)August 36. Assume that as of August 1, 4,500 units of flat panel displays have been produced and sold during the current year. Analysis of the domestic market indicates that 3,600 additional units are expected to be sold during the remainder of the year at the normal product price determined under the product cost concept. On August 3, Crystal Displays Inc. received an offer from Maple Leaf Visual Inc. for 1,400 units of flat panel displays at $202.50 each. Maple Leaf Visual Inc. will market the units in Canada under its own brand name, and no variable selling and administrative expenses associated with the sale will be incurred by Crystal Displays Inc. The additional business is not expected to affect the domestic sales of flat panel displays, and the additional units could be produced using existing factory, selling, and administrative capacity.
a. Prepare a differential analysis of the proposed sale to Maple Leaf Visual Inc. If an amount is zero, enter zero "0". For those boxes in which you must enter subtracted or negative numbers use a minus sign.
Reject
Order
(Alternative 1)Accept
Order
(Alternative 2)Differential
Effects
(Alternative 2)Revenues $fill in the blank 2b1c1ef6202afd4_1 $fill in the blank 2b1c1ef6202afd4_2 $fill in the blank 2b1c1ef6202afd4_3 Costs: Variable manufacturing costs fill in the blank 2b1c1ef6202afd4_4 fill in the blank 2b1c1ef6202afd4_5 fill in the blank 2b1c1ef6202afd4_6 Profit (loss )$fill in the blank 2b1c1ef6202afd4_7 $fill in the blank 2b1c1ef6202afd4_8 $fill in the blank 2b1c1ef6202afd4_9 Question Content Area
b. Based on the differential analysis in part (a), should the proposal be accepted?
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