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

question 172

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.

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Definitions:

Curvilinear Relationship

A relationship between two variables in which the change in one variable does not result in a linear change in the other variable.

Operationally Defining

The process of defining a concept or variable in terms of the specific procedures or measures used to produce or manipulate it.

Curvilinear Relationship

A type of relationship between two variables where the change in one variable does not result in a linear change in another, often depicted as a curved graph.

Negative Relationship

A type of correlation where an increase in one variable is associated with a decrease in another variable.