Use this information for Magpie Corporation to answer the questions that follow.

Magpie Corporation uses the total cost concept of product pricing. Below is the cost information for the production and sale of 60,000 units of its sole product. Magpie desires a profit equal to a 25% rate of return on invested assets of $700,000.

$$\begin{array} { l r }
\text { Fixed factory overhead cost } & \$ 38,700 \
\text { Fixed selling and administrative costs } & 7,500 \
\text { Variable direct materials cost per unit } & 4.60 \
\text { Variable direct labor cost per unit } & 1.88 \
\text { Variable factory overhead cost per unit } & 1.13 \
\text { Variable selling and administrative cost per unit } & 4.50
\end{array}$$
-Contractors who sell to government agencies would be most likely to use which of the following cost concepts in pricing their products?
A) variable cost concept
B) product cost concept
C) total cost concept
D) fixed cost concept

Question

Use this information for Magpie Corporation to answer the questions that follow.
​
Magpie Corporation uses the total cost concept of product pricing. Below is the cost information for the production and sale of 60,000 units of its sole product. Magpie desires a profit equal to a 25% rate of return on invested assets of $700,000.
​
​
 $$\begin{array} { l r } 
\text { Fixed factory overhead cost } & \$ 38,700 \
\text { Fixed selling and administrative costs } & 7,500 \
\text { Variable direct materials cost per unit } & 4.60 \
\text { Variable direct labor cost per unit } & 1.88 \
\text { Variable factory overhead cost per unit } & 1.13 \
\text { Variable selling and administrative cost per unit } & 4.50
\end{array}$$
-Contractors who sell to government agencies would be most likely to use which of the following cost concepts in pricing their products?
A) variable cost concept
B) product cost concept
C) total cost concept
D) fixed cost concept

Quizplus · Accepted Answer

Contractors who sell to government agencies often use the total cost concept in pricing their products. This approach includes both fixed and variable costs in determining the price, ensuring that all costs are covered and a desired profit margin is achieved.

Use This Information for Magpie Corporation to Answer the Questions