(Appendix 12A)Cost data relating to the single product produced by the Jones Company are given below: $\begin{array}{lccc}
& \underline { \text { Per Unit } } & \underline { \text { Total per year} } \
\text { Direct materials } & \$ 10 & \
\text { Direct labour } & 6& \
\text { Variable manufacturing overhead } & 3 & \
\text { Fixed manufacturing overhead. } & & \$ 140,000 \
\text { Variable selling, general, and } & & \
\text { administrative expense } & 1 & \
\text { Fixed selling, general, and } & & \
\text { administrative expense } & - & \$ 180,000
\end{array}$
The Jones Company uses the absorption costing approach with a desired markup of 60%.If the company plans to produce and sell 20,000 units each year,what would be the target selling price per unit?
A) $32.00.
B) $36.00.
C) $41.60.
D) $43.20.

Question

(Appendix 12A)Cost data relating to the single product produced by the Jones Company are given below: $\begin{array}{lccc}
& \underline { \text { Per Unit } } & \underline { \text { Total per year} } \
\text { Direct materials } & \$ 10 & \
\text { Direct labour } & 6& \
\text { Variable manufacturing overhead } & 3 & \
\text { Fixed manufacturing overhead. } &  & \$ 140,000 \
\text { Variable selling, general, and } & & \
\text { administrative expense } & 1 & \
\text { Fixed selling, general, and } & & \
\text { administrative expense } & - & \$ 180,000
\end{array}$
 The Jones Company uses the absorption costing approach with a desired markup of 60%.If the company plans to produce and sell 20,000 units each year,what would be the target selling price per unit?
A) $32.00.
B) $36.00.
C) $41.60.
D) $43.20.

Quizplus · Accepted Answer

Total manufacturing cost per unit:
Direct materials + Direct labor + Variable manufacturing overhead + Fixed manufacturing overhead/Units produced
= $10 + $6 + $3 + $140,000/20,000
= $22
Total cost per unit:
Direct materials + Direct labor +
Variable manufacturing overhead + Fixed manufacturing overhead + Variable selling, general, and administrative expense + Fixed selling, general, and administrative expense
= $10 + $6 + $3 + $140,000/20,000 + $1 + $180,000/20,000
= $31
Markup percentage = Desired profit/Total cost
60% = Desired profit/$31
Desired profit = $18.60
Target selling price per unit = Total cost per unit + Desired profit per unit
= $31 + $18.60/20,000
= $41.60

(Appendix 12A)Cost Data Relating to the Single Product Produced by the Jones