Crystal Displays Inc. recently began production of a newproduct, flat panel displays, which required the investment of$1,500,000 in assets. The costs of producing and selling 5,000units of flat panel displays are estimated as follows:
1
Variable costs per unit:
2
Direct materials
$119.00
3
Direct labor
32.00
4
Factory overhead
52.00
5
Selling and administrative expenses
36.00
6
Total variable cost per unit
$239.00
7
Fixed costs:
8
Factory overhead
$245,000.00
9
Selling and administrative expenses
147,000.00
Crystal Displays Inc. is currently considering establishing aselling price for flat panel displays. The president of CrystalDisplays has decided to use the cost-plus approach to productpricing and has indicated that the displays must earn a 17% returnon invested assets.
1. Determine the amount of desired profit from the productionand sale of flat panel displays.
2. Assuming that the product cost method is used, determine (a)the cost amount per unit, (b) the markup percentage, and (c) theselling price of flat panel displays. Round your markup percentageand selling price to two decimal places.
Cost amount per unit Markup percentage % Selling price
3. (Appendix) Assuming that the total cost method is used,determine (a) the cost amount per unit, (b) the markup percentage,and (c) the selling price of flat panel displays. Round your markuppercentage and selling price to two decimal places.
Cost amount per unit Markup percentage % Selling price
4. (Appendix) Assuming that the variable cost method is used,determine (a) the cost amount per unit, (b) the markup percentage,and (c) the selling price of flat panel displays. Round your markuppercentage and selling price to two decimal places.
Cost amount per unit Markup percentage % Selling price
5. Comment on any additional considerations that could influenceestablishing the selling price for flat panel displays.
The cost-plus approach price computed above should be viewed asa general guideline for establishing long-run normal prices;however, other considerations, such as , could lead management toestablish a different short-run price.
6a. Prepare a differential analysis of the proposed sale toMaple Leaf Visual Inc. Refer to the lists of Labels and AmountDescriptions for the exact wording of the answer choices for textentries. For those boxes in which you must enter subtracted ornegative numbers use a minus sign. If there is no amount or anamount is zero, enter â0â. A colon (:) will automatically appear ifrequired.
Differential Analysis
Reject (Alternative 1) or Accept (Alternative 2) Order
August 3
1
Reject Order
Accept Order
Differential Effect on Income
2
(Alternative 1)
(Alternative 2)
(Alternative 2)
3
4
5
6
6b. Based on the differential analysis in part (a), should theproposal be accepted?
The company is indifferent since the result is the sameregardless of which alternative is chosen.
Yes
No
Crystal Displays Inc. recently began production of a newproduct, flat panel displays, which required the investment of$1,500,000 in assets. The costs of producing and selling 5,000units of flat panel displays are estimated as follows:
1 | Variable costs per unit: | |
2 | Direct materials | $119.00 |
3 | Direct labor | 32.00 |
4 | Factory overhead | 52.00 |
5 | Selling and administrative expenses | 36.00 |
6 | Total variable cost per unit | $239.00 |
7 | Fixed costs: | |
8 | Factory overhead | $245,000.00 |
9 | Selling and administrative expenses | 147,000.00 |
Crystal Displays Inc. is currently considering establishing aselling price for flat panel displays. The president of CrystalDisplays has decided to use the cost-plus approach to productpricing and has indicated that the displays must earn a 17% returnon invested assets.
1. Determine the amount of desired profit from the productionand sale of flat panel displays.
2. Assuming that the product cost method is used, determine (a)the cost amount per unit, (b) the markup percentage, and (c) theselling price of flat panel displays. Round your markup percentageand selling price to two decimal places.
Cost amount per unit | |
Markup percentage | % |
Selling price |
3. (Appendix) Assuming that the total cost method is used,determine (a) the cost amount per unit, (b) the markup percentage,and (c) the selling price of flat panel displays. Round your markuppercentage and selling price to two decimal places.
Cost amount per unit | |
Markup percentage | % |
Selling price |
4. (Appendix) Assuming that the variable cost method is used,determine (a) the cost amount per unit, (b) the markup percentage,and (c) the selling price of flat panel displays. Round your markuppercentage and selling price to two decimal places.
Cost amount per unit | |
Markup percentage | % |
Selling price |
5. Comment on any additional considerations that could influenceestablishing the selling price for flat panel displays.
The cost-plus approach price computed above should be viewed asa general guideline for establishing long-run normal prices;however, other considerations, such as , could lead management toestablish a different short-run price.
6a. Prepare a differential analysis of the proposed sale toMaple Leaf Visual Inc. Refer to the lists of Labels and AmountDescriptions for the exact wording of the answer choices for textentries. For those boxes in which you must enter subtracted ornegative numbers use a minus sign. If there is no amount or anamount is zero, enter â0â. A colon (:) will automatically appear ifrequired.
Differential Analysis |
Reject (Alternative 1) or Accept (Alternative 2) Order |
August 3 |
1 | Reject Order | Accept Order | Differential Effect on Income | |
2 | (Alternative 1) | (Alternative 2) | (Alternative 2) | |
3 | ||||
4 | ||||
5 | ||||
6 |
6b. Based on the differential analysis in part (a), should theproposal be accepted?
The company is indifferent since the result is the sameregardless of which alternative is chosen.
Yes
No