Blue Lights Co. uses the total cost concept of product pricing. Given below is cost information for the production and sale of 50,000 units of its sole product. Blue Lights desires a profit equal to a 12.6% rate of return on invested assets of $1,000,000. Fixed factory overhead cost $90,000 Fixed selling and administrative costs 55,000 Variable direct materials cost per unit 6.00 Variable direct labor cost per unit 9.65 Variable factory overhead cost per unit 3.50Variable selling and administrative cost per unit 1.20 Based on the information provided, the dollar amount of desired profit from the production and sale of the companys production is:.a) $96,000.
b) $126,000.
c) $67,200.
d) $237,700.

Blue Lights Co.

Based on the information provided, the dollar amount of desired profit from the production and sale of the company's production is:

b) $126,000.

Explanation:

a) Data and Calculations:

Cost information for the production and sale of 50,000 units

Desired profits = 12.6% of $1,000,000 = $126,000

Fixed factory overhead =                 $90,000

Fixed selling and admin. =                 55,000

Variable direct materials = $6.00

Variable direct labor cost =  9.65

Variable factory overhead = 3.50

Variable selling and admin.  1.20

Total variable costs =      $20.35  1,017,500

Total costs =                                $1,162,500

Desired profit =                               126,000

Sales revenue =                         $1,288,500

Selling price per unit = $1,288,500/50,000 = $25.77

answer; rapid growth in buyer demand and high buyer switching cost;