Use this information for Mallard Corporation to answer the questions that follow.

Mallard Corporation uses the product cost concept of product pricing. Below is the cost information for the production and sale of 45,000 units of its sole product. Mallard desires a profit equal to a 12% rate of return on invested assets of $800,000.

$$\begin{array} { l r }
\text { Fixed factory overhead cost } & \$ 82,000 \
\text { Fixed selling and administrative costs } & 45,000 \
\text { Variable direct materials cost per unit } & 5.50 \
\text { Variable direct labor cost per unit } & 7.65 \
\text { Variable factory overhead cost per unit } & 2.25 \
\text { Variable selling and administrative cost per unit } & 0.90
\end{array}$$
-The unit selling price for the company's product is
A) $19.35
B) $15.75
C) $22.05
D) $21.25

Question

Use this information for Mallard Corporation to answer the questions that follow.
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Mallard Corporation uses the product cost concept of product pricing. Below is the cost information for the production and sale of 45,000 units of its sole product. Mallard desires a profit equal to a 12% rate of return on invested assets of $800,000.
​
 $$\begin{array} { l r } 
\text { Fixed factory overhead cost } & \$ 82,000 \
\text { Fixed selling and administrative costs } & 45,000 \
\text { Variable direct materials cost per unit } & 5.50 \
\text { Variable direct labor cost per unit } & 7.65 \
\text { Variable factory overhead cost per unit } & 2.25 \
\text { Variable selling and administrative cost per unit } & 0.90
\end{array}$$
-The unit selling price for the company's product is
A) $19.35
B) $15.75
C) $22.05
D) $21.25

Quizplus · Accepted Answer

To find the unit selling price, first calculate the total desired profit, which is 12% of $800,000 = $96,000. Then, calculate the total costs, which include both fixed and variable costs. The total variable cost per unit is the sum of variable direct materials, variable direct labor, variable factory overhead, and variable selling and administrative costs, which equals $5.50 + $7.65 + $2.25 + $0.90 = $16.30. The total fixed costs are $82,000 (fixed factory overhead) + $45,000 (fixed selling and administrative costs) = $127,000. To find the total cost, add the total fixed costs to the total variable costs for all units (45,000 units * $16.30 per unit) = $127,000 + (45,000 * $16.30) = $127,000 + $733,500 = $860,500. Add the desired profit of $96,000 to the total costs of $860,500 to get $956,500. Finally, divide this by the number of units (45,000) to find the unit selling price: $956,500 / 45,000 = $21.25.

Use This Information for Mallard Corporation to Answer the Questions