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

question 38

Essay

Jarvis Company uses the total cost concept of applying the cost-plus approach to product pricing.The costs and expenses of producing and selling 35,000 units of Product E are as follows: $\begin{array}{lrr} \text {Variable costs: } &\\ \text { Direct materials } &\$3.00\\ \text { Direct labor } &1.25\\ \text { Factory overhead} &0.75\\ \text { Selling and administrative expenses } &3.00\\ \text {Total } &\underline{\underline{\$8.00}}\\\\ \text { Fixed costs: } &\\ \text {Factory over head } &\$50.000\\ \text {Selling and administrative expenses } &20,000\\\end{array}$
?
Jarvis desires a profit equal to a 14% rate of return on invested assets of $450,000.
(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 35,000 units of Product E.
(c)Determine the markup percentage for Product E.
(d)Determine the selling price of Product E.

---

Definitions:

Heuristic

Cognitive shortcuts or rules of thumb that simplify decision making, often at the expense of accuracy or completeness.

Mechanical Procedure

A process or operation that is carried out with machinery or equipment rather than by hand or through human effort.

Expert

An individual with advanced knowledge or skills in a specific area, resulting from significant experience, research, or education.

Conceptual Network Approach

A method in cognitive psychology that describes how concepts and their properties are interconnected in the mind to form a network.