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

question 102

Multiple Choice

Red Co.uses the product cost concept of applying the cost-plus approach to product pricing.Given 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 unit selling price for the company's product is:

• A) $28.
• B) $37.
• C) $42.
• D) $33.

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Definitions:

Overhead Cost

The ongoing expenses of operating a business that are not directly tied to the production of goods or services, such as rent and utilities.

Product Line

A group of related products under a single brand sold by the same company.

Facility Level Activity

Operations and processes that support the overall functioning of a facility, but are not directly tied to the production of goods or services.

Veterinary Clinic

A medical facility focused on the diagnosis, treatment, and care of animals, offering services like surgery, dental care, and preventive medicine.