Mallard Corporation uses the product cost concept of product pricing. Below is 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. The dollar amount of desired profit from the production and sale of the company's product is
A) $105,840
B) $225,000
C) $96,000
D) $220,500

Question

Mallard Corporation uses the product cost concept of product pricing. Below is 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.  The dollar amount of desired profit from the production and sale of the company's product is
A) $105,840 
B) $225,000 
C) $96,000 
D) $220,500

Quizplus · Accepted Answer

To calculate the dollar amount of desired profit, we first need to find the total cost of producing and selling 45,000 units of the product. Using the product cost concept, we add up the direct materials, direct labor, and manufacturing overhead costs to get the total production cost per unit:

Direct materials: $15
Direct labor: $10
Manufacturing overhead: $5

Total production cost per unit: $30

Multiplying the production cost per unit by the number of units produced gives us the total cost of producing and selling 45,000 units:

Total cost = 45,000 x $30
Total cost = $1,350,000

Next, we need to calculate the amount of profit required to achieve a 12% rate of return on invested assets of $800,000:

Desired profit = 12% x $800,000
Desired profit = $96,000

Therefore, the dollar amount of desired profit from the production and sale of the company's product is $96,000, which is option C.

Mallard Corporation Uses the Product Cost Concept of Product Pricing