FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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Question 1
Wood Creations designs, manufactures, and sells modern wood sculptures. Sally Jensen is
an artist for the company. Jensen has spent much of the past month working on the design
of an intricate abstract piece. Jim Smoot, product development manager, likes the design.
However, he wants to make sure that the sculpture can be priced competitively. Alexis
Nampa, Wood's cost accountant, presents Smoot with the following cost data for the
expected production of 75 sculptures:
$ 8,000
30,000
37,000
33,000
25,000
15,000
Design cost
Direct materials
Direct manufacturing labor
Variable manufacturing overhead
Fixed manufacturing overhead
Marketing
Required:
1. Smoot thinks that Wood Creations can successfully market each piece for $2,400. The
1)(a) ignore above info,
suppose aim to earn 20%
market price
company's target operating income is 20% of revenue.
$2,400
75units a.) Wood Creations has a total capital investment of $240,000. Compute the target
percentage of return on investment.
b.) Calculate the markup percentage on full cost based on the current cost data.
c.) Calculate the target full cost of producing the 75 sculptures. Does the cost estimate
Nampa developed meet Wood's requirements? Is value engineering needed?
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Transcribed Image Text:Question 1 Wood Creations designs, manufactures, and sells modern wood sculptures. Sally Jensen is an artist for the company. Jensen has spent much of the past month working on the design of an intricate abstract piece. Jim Smoot, product development manager, likes the design. However, he wants to make sure that the sculpture can be priced competitively. Alexis Nampa, Wood's cost accountant, presents Smoot with the following cost data for the expected production of 75 sculptures: $ 8,000 30,000 37,000 33,000 25,000 15,000 Design cost Direct materials Direct manufacturing labor Variable manufacturing overhead Fixed manufacturing overhead Marketing Required: 1. Smoot thinks that Wood Creations can successfully market each piece for $2,400. The 1)(a) ignore above info, suppose aim to earn 20% market price company's target operating income is 20% of revenue. $2,400 75units a.) Wood Creations has a total capital investment of $240,000. Compute the target percentage of return on investment. b.) Calculate the markup percentage on full cost based on the current cost data. c.) Calculate the target full cost of producing the 75 sculptures. Does the cost estimate Nampa developed meet Wood's requirements? Is value engineering needed?
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