Product Cost Concept of Product Pricing Willis Products Inc. uses the product cost concept of applying the cost-plus approach to product pricing. The costs of producing and selling 200,000 units of medical tablets are as follows: Variable costs per unit: Fixed costs: Direct materials $ 75 Factory overhead $ 800,000 Direct labor 115 Selling and admin. exp. 1,200,000 Factory overhead 30 Selling and admin. exp. 20 Total $240 Willis Products desires a profit equal to a 20% rate of return on invested assets of $12,000,000. a. Determine the total manufacturing costs for the production and sale of 200,000 units

Total production cost= $44,800,000

Explanation:

Giving the following formula:

Direct materials $ 75

Factory overhead $ 800,000

Direct labor 115

Factory overhead 30

The absorption costing method includes all costs related to production, both fixed and variable. The unit product cost is calculated using direct material, direct labor, and total unitary manufacturing overhead.

Total production cost= 800,000 + 200,000*(75 + 115 + 30)

Total production cost= $44,800,000

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