Based on the data presented in Exercise 25-17, assume that Smart Stream Inc. uses the variable cost concept of applying the cost-plus approach to product pricing.

Based on the data presented in Exercise 25-17, assume that Smart Stream Inc. uses the variable cost concept of applying the cost-plus approach to product pricing.

a. Determine the variable costs and the variable cost amount per unit for the production and sale of 10,000 cellular phones.

b. Determine the variable cost markup percentage (rounded to two decimal places) for cellular phones.

c. Determine the selling price of cellular phones. Round to the nearest dollar.

Answer:

a. Total variable costs: ($240 × 10,000 units)……………………………………… $2,400,000 

Cost amount per unit:  $2,400,000 ÷ 10,000 units = $240 

b. Markup percentage = 

Markup percentage = 

Markup percentage = 

Desired Profit + Total Fixed Costs 

Total Costs 

$360,000* + $350,000 + $140,000 

$2,400,000 

$850,000 

$2,400,000 

Markup percentage =   35.42% 

* $1,200,000 × 30% = $360,000 

c. Cost amount per unit………………………………………………………………… $240 

 Markup ($240 × 35.42%)………………………………………………………………     85 

 Selling price…………………………………………………………………………… $325