Cost Accounting Quiz: Cost Plus Pricing

Pioneer Products plans to sell 5,000 units of its new device. The variable cost per unit is $80. Total fixed costs are $250,000. The company wants to achieve a total profit of $150,000. Using a variable cost-plus approach, what markup percentage on variable cost is needed to achieve the target profit?

A company produces a product with a variable cost of $40 per unit and total fixed costs of $300,000. It currently produces and sells 30,000 units. The company uses a full cost-plus model with a 25% markup. If expected production and sales increase to 37,500 units, what will be the new target selling price?

A company sets its selling price at $78 per unit. This price was determined using a 30% markup on the full cost per unit. The variable cost per unit is $45. The company produced and sold 20,000 units. What were the company's total fixed costs for the period?

A company's product has a full cost of $75 per unit. The company sets its price to achieve a 20% markup on cost. An economic downturn causes the company to offer a 10% discount on its list price to stimulate sales. What is the final selling price per unit after the discount?

A division of Zenith Corp. has invested $2,000,000 in assets to produce a new product. Management requires a 15% annual return on investment (ROI). Budgeted production and sales are 40,000 units, and the full cost to produce and sell each unit is $65. To achieve the desired ROI, what selling price must the company set?

Vortex Inc. uses a variable cost-plus pricing model, setting its price at a 60% markup on total variable costs. The current selling price of its product is $120 per unit. If the variable manufacturing cost is $60 per unit, what is the variable selling and administrative cost per unit?

A company is developing a new product. It estimates the following total life-cycle costs: R&D and design, $500,000; manufacturing, $1,200,000; marketing and distribution, $600,000; and after-sale service, $100,000. The company expects to produce and sell 80,000 units over the product's life. To achieve a life-cycle profit of $400,000, what price must the company charge per unit?

Apex Industries uses a pricing policy where the markup is based on full manufacturing cost. The markup must be sufficient to cover all S&A costs and provide a target profit. For the upcoming year, the company budgets total manufacturing costs of $1,000,000, total S&A costs of $300,000, and a target profit of $200,000. What markup percentage on full manufacturing cost should the company use?

A company provides the following data for its sole product: variable cost per unit is $30, and total fixed costs are $100,000 based on a volume of 10,000 units. The company has two pricing policies it is considering: (1) a 50% markup on full cost, or (2) a 100% markup on variable cost. What is the difference in the selling price between the two policies?

A company's cost structure includes prime costs of $40 per unit and conversion costs of $35 per unit. Of the conversion costs, $15 is for variable manufacturing overhead. Total fixed manufacturing overhead is $200,000 for a production run of 20,000 units. Direct labor is the only cost component common to both prime and conversion costs. What is the full manufacturing cost per unit, to be used as a basis for cost-plus pricing?

A company is considering a special order for 1,000 units. The product normally sells for $150. The full cost per unit is $120, which includes $40 of allocated fixed overhead. The variable cost per unit is $80. The company has excess capacity. To achieve a 25% markup on the relevant costs for this decision, what is the minimum price the company should charge for the special order?

A consulting firm prices its services at full cost plus a 40% markup. A recent project required 200 direct professional labor hours at a cost of $100 per hour. Variable overhead is applied at $20 per direct labor hour. Total fixed overhead for the firm is $500,000, and it expects to log 10,000 total direct labor hours for the year. What is the total price quoted for this project?

Caspian Corp. is developing a pricing strategy for a new product. The variable cost per unit is $50. Management wants to achieve a contribution margin of 40% of the selling price. What selling price should be set?

A company has an investment in assets of $800,000 and requires a 20% return on this investment. Cost information for its product, based on an expected volume of 16,000 units, is as follows: direct materials per unit, $15; direct labor per unit, $10; variable overhead per unit, $5; and total fixed costs, $240,000. What selling price per unit must be set to achieve the target ROI, using a full-cost basis?

A company manufactures a product with a variable manufacturing cost of $35 and a variable S&A cost of $5. Total fixed manufacturing overhead is $150,000, and total fixed S&A cost is $90,000. The company expects to sell 20,000 units. If the company uses variable cost-plus pricing with a markup of 80%, what is the selling price?

A company determines its selling price using cost-plus pricing. The full cost of its product is $90 per unit. Management's policy is to achieve a profit margin of 25% on the final selling price. What is the target selling price?

A firm uses full cost-plus pricing with a 20% markup. The current price is $96 per unit based on production of 10,000 units. The direct material cost, which is a variable cost, is expected to increase by $5 per unit. All other costs and the markup percentage will remain constant. What will be the new selling price if the production volume remains at 10,000 units?

A company's manufacturing costs are described by the formula Y = $400,000 + $25X, where X is the number of units produced. The company projects production of 50,000 units. Its pricing policy is to mark up the full manufacturing cost per unit by 50%. What is the target selling price per unit?

Titan Manufacturing uses full cost-plus pricing with a standard 30% markup. For a new product line, the following annual costs are projected: direct materials $320,000, direct labor $180,000, variable overhead $140,000, fixed overhead $200,000, variable selling expenses $60,000, and fixed administrative expenses $80,000. The company plans to produce 2,000 units annually. However, a competitor analysis reveals that the market price for similar products is $510 per unit. What adjustment to the markup percentage would allow Titan to match the competitive price?

Atlas Manufacturing produces two products using the same facilities. The following data applies: Direct materials - Product 1: $25/unit, Product 2: $40/unit; Direct labor - Product 1: $15/unit, Product 2: $30/unit; Variable overhead - Product 1: $10/unit, Product 2: $20/unit. Fixed manufacturing overhead is $180,000 annually. Product 1 requires 2 labor hours per unit and Product 2 requires 3 labor hours per unit. If 3,000 units of Product 1 and 2,000 units of Product 2 are produced, and management wants a 20% markup on full cost for Product 2, what amount of fixed overhead should be allocated to each unit of Product 2 for pricing purposes?