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.

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Definitions:

Cheque

A document that is written, dated, and contains a signature, instructing a bank to pay a certain amount of money to either the person holding it or to an individual named in the document.

Credited

The action of officially recognizing or adding an amount to an account, often referring to the depositing of funds or acknowledgment of income earned.

Account

A record or statement of financial transactions pertaining to an individual, business, or other entity.

Invoice

A document issued by a seller to a buyer that outlines the goods or services sold, their prices, and the payment terms.