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

question 6

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.

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Definitions:

Yellow Dog Contracts

Employment agreements where the employee pledges not to join a labor union during the term of employment; these are illegal in the United States.

Free Trade

An economic policy that allows imports and exports among countries with minimal regulatory barriers or tariffs.

Legal Regulation

The implementation and enforcement of laws by a governing body to control or direct the activities conducted by individuals, organizations, or systems.

Public Interest

The welfare or well-being of the general public, often considered a guideline in determining policy and laws.