Red CoUses the Product Cost Concept of Applying the Cost-Plus Approach

question 26

Multiple Choice

Red Co.uses the product cost concept of applying the cost-plus approach to product pricing.Below is cost information for the production and sale of 40,000 units of its sole product.Red Co.desires a profit equal to a 15% rate of return on invested assets of $1,200,000. ? $$\begin{array} { l r } \text { Fixed factory overhead cost } & \$ 80,000.00 \\\text { Fixed selling and administrative costs } & 140,000.00 \\\text { Variable direct materials cost per unit } & 7.00 \\\text { Variable direct labor cost per unit } & 11.00 \\\text { Variable factory overhead cost per unit } & 3.00 \\\text { Variable selling and administrative cost per unit } & 2.00\end{array}$$ ?
The dollar amount of desired profit from the production and sale of the company's product is:

• A) $70,000.
• B) $60,000.
• C) $180,000.
• D) $140,000.