Rock Hill Relaxation Company sells vitamin supplements. They have collected the following budget information about the 10,000 bottles of supplements they expect to sell; Total Direct Material Cost $27,000, Total Direct Labor Cost $15,000, Total Manufacturing Overhead Cost $12,000, Total Selling and Administrative Expenses $3,000. Rock Hillis desired profit is a 50% return on investment of their $90,000 of total assets. At what amount should Rock Hill price its supplements, if they are using the Product Cost Method of pricing? a.) $5.30 b.) $10.70 e) $15.75 d) $13.65

Question

Rock Hill Relaxation Company sells vitamin supplements. They have collected the following budget information about the 10,000 bottles of supplements they expect to sell; Total Direct Material Cost  $27,000, Total Direct Labor Cost  $15,000, Total Manufacturing Overhead Cost  $12,000, Total Selling and Administrative Expenses  $3,000. Rock Hillis desired profit is a  50% return on investment of their  $90,000 of total assets. At what amount should Rock Hill price its supplements, if they are using the Product Cost Method of pricing? a.)  $5.30 b.)  $10.70 e)  $15.75 d)  $13.65

Bytelearn · Accepted Answer

Calculate Total Product Cost: Question prompt: At what amount should Rock Hill price its supplements using the Product Cost Method of pricing?Determine Cost per Bottle: Calculate the total product cost by adding the Total Direct Material Cost, Total Direct Labor Cost, and Total Manufacturing Overhead Cost. Total Product Cost = Total Direct Material Cost + Total Direct Labor Cost + Total Manufacturing Overhead Cost Total Product Cost = $27,000 + $15,000 + $12,000 Total Product Cost = $54,000Calculate Desired Profit: Determine the cost per bottle by dividing the Total Product Cost by the number of bottles. Cost per bottle = Total Product Cost / Number of bottles Cost per bottle = $54,000 / 10,000 bottles Cost per bottle = $5.40Determine Desired Profit per Bottle: Calculate the desired profit by finding 50% of the total assets. Desired Profit = 50% of Total Assets Desired Profit = 0.50 * $90,000 Desired Profit = $45,000Calculate Price per Bottle: Determine the desired profit per bottle by dividing the Desired Profit by the number of bottles. Desired Profit per bottle = Desired Profit / Number of bottles Desired Profit per bottle = $45,000 / 10,000 bottles Desired Profit per bottle = $4.50Calculate the price per bottle using the Product Cost Method by adding the cost per bottle and the desired profit per bottle. Price per bottle = Cost per bottle + Desired Profit per bottle Price per bottle = $5.40 + $4.50 Price per bottle = $9.90

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