What is the unit product cost of the gold bracelet manufactured by Imperial Jewelers?
The unit product cost of the gold bracelet manufactured and sold by Imperial Jewelers is $261. This cost includes the direct materials, direct labor, and manufacturing overhead. To calculate the unit product cost, the company adds up the cost of the materials used to make the bracelet, the cost of the labor involved in producing it, and the overhead costs, such as rent, utilities, and depreciation of equipment, that are allocated to each unit produced.
In this case, the unit product cost is $261. This means that Imperial Jewelers spends $261 to produce one gold bracelet.
Calculating Unit Product Cost:
Direct Materials: The cost of the gold and other materials used to make the bracelet.
Direct Labor: The cost of the labor involved in producing the bracelet.
Manufacturing Overhead: Includes costs like rent, utilities, and depreciation of equipment.
By adding up these costs, Imperial Jewelers arrives at a unit product cost of $261 for the gold bracelet. It's essential for the company to know this cost to ensure they are pricing their product competitively and making a profit.
Selling Price vs. Unit Product Cost:
The selling price of the bracelet is $405, which is higher than the unit product cost of $261. This price difference is necessary to cover other expenses like marketing, distribution, and to generate a profit for the company.
Imperial Jewelers spends $261 to produce one gold bracelet, but they sell it for $405. This means they make a profit of $144 on each bracelet sold. Understanding the relationship between unit product cost and selling price is crucial for a business to operate successfully.
In summary, knowing the unit product cost helps Imperial Jewelers make pricing decisions, manage costs, and ensure profitability in their operations.