Hummingbird Company Uses the Product Cost Concept of Applying the Cost-Plus

Essay

Hummingbird Company uses the product cost concept of applying the cost-plus approach to product pricing. The costs and expenses of producing 25,000 units of Product K are as follows:
Variable costs: $\begin{array}{lc}\text { Direct materials } & \$ 2.50 \\\text { Direct labor } & 4.25 \\\text { Factory overhead } & 1.25 \\\text { Selling and administrative expenses } & 0.50 \\\quad \text { Total } & \$ 8.50\\\text { Fixed costs: }\\\text { Factory overhead } & \$ 25,000 \\\text { Selling and administrative expenses } & 17,000\end{array}$ Hummingbird desires a profit equal to a 5% rate of return on invested assets of $642,500.
a) Determine the amount of desired profit from the production and sale of Product K.
b) Determine the total manufacturing costs and the cost amount per unit for the production of 25,000 units of Product K.
c) Determine the markup percentage for Product K.
d) Determine the selling price of Product K.
Round your markup percentage to one decimal place, and other intermediate calculations and final answer to two decimal places.