23-5a. Safety-Bright Company recently began production of a new product, the halogen light, which required the investment of 1,000,000 in assets

23-5a. Safety-Bright Company recently began production of a new product, the halogen light, which required the investment of 1,000,000 in assets. The costs of producing and selling 20,000 halogen lights are estimated as follows:

Variable costs per unit:

Direct materials:                                   28

Direct labor:                                         12

Factory overhead:                                5

Selling and adminitrative expenses:     5

Total:                                                   50                                                                              SOLUTION

Fixed costs:

Factory Overhead:                               200,000

Selling and administrative expenses:    80,000

Safety-Bright Company is currently considering establishing a selling price for the halogen light. The president of safety-bright company has decided to use the cost-plus approach to product pricing and has indicated that the halogen light must earn a 15% rate of return on invested assets

Instructions:
a. determine the amount of desired profit from the production and sale of halogen lights

b. assuming that the total cost concept is used, determine the cost amount per unit the markup percentage and the selling price of the halogen light

C.assuming that the product cost concept is used, determine the cost amount per unit the markup percentage and the selling price of the halogen light

d. assuming that the variable cost concept is used, determine the cost amount per unit the markup percentage and the selling price of the halogen light

e. assume that as of June 1, 2006 7,000 units of halogen light have been produced and sold during the current year. Analysis of the domestic market indicates that 10,000 additional units of the halogen light are expected to be sold during the remainder of the year at the normal price determined under the 

Prepare a differential analysis report and the proposed sale to lights Co and based on the report should the proposal be accepted ?

CLICK HERE FOR SOLUTIONtotal cost concept. On June 5, Safety Bright company received an offer from Lights Co. for 2,000 units of the halogen light at 49$ each. Lights Co will market the units in Japan under it's own brand name, and no additional selling and administrative expenses associated with the same will be incurred by Safety Bright Co. The additional business is not expected to affect the domestic sales of the halogen light, and the additional units could be produced using existing capacity.