Raphael Corporation uses the product cost concept of product pricing.Below is cost information for the production and sale of 50,000 units of its sole product.Raphael desires
a profit equal to a 12% rate of return on invested assets of $1,000,000.

-The dollar amount of desired profit from the production and sale of the company's product is
A)$117,600.
B)$250,000.
C)$120,000.
D)$245,000.

Question

Raphael Corporation uses the product cost concept of product pricing.Below is cost information for the production and sale of 50,000 units of its sole product.Raphael desires
a profit equal to a 12% rate of return on invested assets of $1,000,000.
 
-The dollar amount of desired profit from the production and sale of the company's product is
A)$117,600. 
B)$250,000. 
C)$120,000. 
D)$245,000.

Quizplus · Accepted Answer

To calculate the dollar amount of desired profit using the product cost concept, we need to follow these steps:

1. Calculate the total cost of producing 50,000 units:

Direct materials: $450,000
Direct labor: $300,000
Manufacturing overhead: $200,000
Total manufacturing cost: $950,000

2. Add any additional costs, such as selling and administrative expenses:

Selling and administrative expenses: $50,000
Total cost: $1,000,000

3. Determine the desired profit, which is a 12% rate of return on invested assets of $1,000,000:

Desired profit = 12% x $1,000,000 = $120,000

Therefore, the dollar amount of desired profit from the production and sale of the company's product is $120,000. The correct answer is C.

Raphael Corporation Uses the Product Cost Concept of Product Pricing