Jay Company Uses the Total Cost Concept of Applying the Cost-Plus

Essay

Jay Company uses the total cost concept of applying the cost-plus approach to product pricing. The costs and expenses of producing and selling 38,400 units of Product E are as follows: $\begin{array}{ll}\text { Variable costs: } & \\\text { Direct materials } & \$ 4.70 \\\text { Direct labor } & 2.50 \\\text { Factory overhead } & 1.90 \\\text { Selling and administrative expenses } & 2.60\\\text { Total }&\$11.70\\\text { Fixed costs: }\\\text { Factory overhead } & \$ 80,000 \\\text { Selling and administrative expenses } & 14,000\end{array}$ Jay desires a profit equal to a 14% rate of return on invested assets of $640,000.
a) Determine the amount of desired profit from the production and sale of Product E.
b) Determine the total costs and the cost amount per unit for the production and sale of 38,400 units of Product E.
c) Determine the markup percentage for Product E.
d) Determine the selling price of Product E.