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

question 129

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:
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.

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Definitions:

Income Summary

An account in the ledger that aggregates all income and expense accounts to determine the net profit or loss for a certain period.

Revenue Accounts

Accounts that track the income generated from a company's primary operations and activities.

Expense Accounts

Financial accounts used to track money spent or costs incurred by a business in its operational activities.

Closing Entries

Journal entries made at the end of an accounting period to transfer the balances of temporary accounts to permanent ones, thereby preparing the books for the next period.