Financial and Managerial Accounting: PR24-5B Safety Systems, Inc., recently began production

Financial and Managerial Accounting
PR24-5B Product pricing using cost-plus approach concepts; differential analysis for accepting additional business
Safety Systems, Inc., recently began production of a new product, the halogen light, which required the investment of $600,000 in assets. The costs of producing and selling 10,000 halogen lights are estimated as follows:  Variable cost per unit:  Fixed costs:  Direct materials  24.00   Factory overhead   100,000 Direct labor  10.00  Selling and administrative expenses  50,000 Factory overhead  5.00  Selling and administrative expenses  6.00  Total  45.00  Safety Systems, Inc., is currently considering establishing a selling price for the halogen light. The president of Safety Systems, Inc., has decided to use the cost-plus approach to product pricing and has indicated that the halogen light must earn a 10% rate of return on invested assets. 

Instructions:
1. Determine the amount of desired profit from the production and sale of the halogen light. 
2. Assuming that the product cost concept is used, determine the following:  
a) The cost amount per unit.
b)The markup percentage (rounded to two decimal places).
c)The selling price of the halogen light (rounded to nearest whole dollar). 
3. Appendix. Assuming that the total cost concept is used, determine the following:
a) The cost amount per unit.
B) The markup percentage.  
C) The selling price of the halogen light.4. Appendix. Assuming that the variable cost concept is used, determine the following:  
a) The variable cost amount per unit. b) The markup percentage (rounded to two decimal places).
c) The selling price of the halogen light (rounded to nearest whole dollar). 
5. Comment on any additional considerations that could influence establishing the selling price for the halogen light. 
6. Assume that as of September 1, 2012, 7,000 units of halogen light have been produced and sold during the current year. Analysis of the domestic market indicates that 3,000 additional units of the halogen light are expected to be sold during the remainder of the year at the normal product price determined under the product cost concept. On September 5, Safety Systems, Inc., received an offer from International Lighting Inc. for 2,000 units of the halogen light at $42 each. International Lighting Inc. will market the units in Japan under its own brand name, and no selling and administrative expenses associated with the sale will be incurred by Safety Systems, Inc. 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.
a. Prepare a differential analysis of the proposed sale to International Lighting Inc. If an amount is zero, enter zero "0". 
b. Based on the differential analysis in part a, should the proposal be accepted?
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