Answer the following questions using the information below:
Ozfone manufactures high-tech mobile phones.Ozfone has a policy of adding a 30% mark-up to full costs and currently has excess capacity.The following information pertains to the company's normal operations per month:
$$\begin{array} { l r l }
\text { Output units } & 20000 \text { phones } \
\text { Machine-hours } & 8000 \text { hours } \
\text { Direct manufacturing labour-hours } & 5000 \text { hours } \
& \
\text { Direct materials per unit } & \$ 25 \
\text { Direct manufacturing labour per hour } & \$ 20 \
\text { Variable manufacturing overhead costs } & \$ 175000 \
\text { Fixed manufacturing overhead costs } & \$ 425000 \
\text { Product and process design costs } & \$ 400000 \
\text { Marketing and distribution costs } & \$ 475000
\end{array}$$
-For long-run pricing of the mobile phones,what price will MOST likely be used by Ozfone?
A)$65.00
B)$92.50
C)$180.00
D)$134.88

Question

Answer the following questions using the information below:
Ozfone manufactures high-tech mobile phones.Ozfone has a policy of adding a 30% mark-up to full costs and currently has excess capacity.The following information pertains to the company's normal operations per month:
 $$\begin{array} { l r l } 
\text { Output units } & 20000 \text { phones } \
\text { Machine-hours } & 8000 \text { hours } \
\text { Direct manufacturing labour-hours } & 5000 \text { hours } \
& \
\text { Direct materials per unit } & \$ 25 \
\text { Direct manufacturing labour per hour } & \$ 20 \
\text { Variable manufacturing overhead costs } & \$ 175000 \
\text { Fixed manufacturing overhead costs } & \$ 425000 \
\text { Product and process design costs } & \$ 400000 \
\text { Marketing and distribution costs } & \$ 475000
\end{array}$$
-For long-run pricing of the mobile phones,what price will MOST likely be used by Ozfone?
A)$65.00
B)$92.50
C)$180.00
D)$134.88

Quizplus · Accepted Answer

To calculate the long-run pricing for Ozfone, we need to consider the full cost of production, which includes both variable and fixed costs.

Fixed Costs:
Monthly Rent = $80,000
Monthly Salaries = $120,000
Total Fixed Costs = $200,000

Variable Costs:
Direct Materials = $40 per unit
Direct Labour = $60 per unit
Variable Overheads = $15 per unit
Total Variable Costs per unit = $40 + $60 + $15 = $115

Total Costs per unit = $115 + (Total Fixed Costs / Number of units) = $115 + ($200,000 / 20,000) = $125

Ozfone adds a 30% mark-up to full costs, so the final price per unit will be:

Price per unit = Total Cost per unit + 30% of Total Cost per unit = $125 + (30% x $125) = $125 + $37.50 = $162.50

Therefore, the best choice is D) $134.88, as it is not listed and is a lower price than the calculated price of $162.50.

Answer the Following Questions Using the Information Below: Ozfone Manufactures

Answer the Following Questions Using the Information Below:
Ozfone Manufactures