Mesa Cheese Company has developed a new cheese slicer called Slim Slicer. The company plans to sell this slicer through its catalog,which it issues monthly. Given market research, Mesa believes that it can charge $30 for the Slim Slicer. Prototypes of the Slim Slicer,however, are costing $31. By using cheaper materials and gaining efficiencies in mass production, Mesa believes it can reduce SlimSlicer's cost substantially. Mesa wishes to earn a return of 40% of the selling price.(a)Compute the target cost for the Slim Slicer.Target cost $

Target cost is the total cost of the product less a predetermined portion of the profit that is…

Answered: Mesa Cheese Company has developed a new…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Mesa Cheese Company has developed a new cheese slicer called Slim Slicer. The company plans to sell this slicer through its online website. Given market research, Mesa believes that it can charge $20 for the Slim Slicer. Prototypes of the Slim Slicer, however, are costing $22. By using cheaper materials and gaining efficiencies in mass production, Mesa believes it can reduce Slim Slicer's cost substantially. Mesa wishes to earn a return of 40% of the selling price. (b) When is target costing particularly helpful in deciding whether to produce a given product?
Premo Pens, Inc., is in the process of developing a newpen to replace its existing top-of-the-line Executive Model.Market research has identified the critical features the pen must have, and it is estimated that customers would be will-ing to pay $30 for a pen with these features. Premo’s produc-tion manager estimates that with existing equipment it will cost $26 to produce the proposed model. The current Execu-tive Model sells for $24 and has a total production cost of $20. A competitor sells a pen similar to the proposed model,but without Premo’s patented easy retract feature, for $28. Itis estimated to cost the competitor $25 to produce. If Premoseeks to earn a 20 percent return on sales on the new model,which of the following represents the target cost for the newpen?a. $26.00.b. $22.40.c. $24.00.d. $19.80.
Premium Corporation believes that there is a market for a portable electronic toothbrush that can be easily carried by business travelers. Premium's market research department has surveyed the features and prices of electronic brushes currently on the market. Based on this research, Premium believes that $75 would be about the right price. At this price, marketing believes that about 78,000 new portable brushes can be sold over the product's life cycle. It will cost about $1,170,000 to design and develop the portable brush. Premium has a target profit of 25% of sales. Requirement 1. Determine the total and unit target cost to manufacture, sell, distribute, and service the portable brushes. Requirement 1. Determine the total and unit target cost to manufacture, sell, distribute, and service the portable brushes. Begin by computing the total target cost to manufacture, sell, distribute, and service the portable brushes, then compute the unit target cost to manufacture, sell, distribute,…
Dell has decided to improve its products' cooling system to achieve better performance and enhance their efficiency. To do so Dell determined its need to design 25,000 new hybrid cooling fans. The company has two choices, either to Make, or Outsource the hybrid cooling fans. In the Making process, Dell must pay $5 per fan with a production line cost of $5,000. The process could be either a success or a failure, with a probability of 0.65 in case of success and 0.35 in case of failure. If the making process was successful, no additional fees will be incurred. On the other hand, if the process was a failure, then 15% of total fans made must be fixed with a fixing cost/defective fan of $3. In the outsourcing process, the cost per fan depends on the market conditions. According to previous studies, the market could have two approaches, the first approach will cost Dell $8 per fan, while the second market approach will cost Dell $4.5 per fan and a Tax of 13% &: • 20% defective fans with a…
Hair Zone manufactures a brand of hair-styling gel. It is considering adding a modified version of the product – a foam that provides stronger hold. Hair Zone’s variable costs and prices to wholesalers are: Hair Zone expects to sell 1 million units of the new styling foam in the first year after introduction, but it expects that 60 per cent of those sales will come from buyers whonormally purchase Hair Zone’s styling gel. Hair Zone estimates that it would sell 1.5 million units of the gel if it did not introduce the foam. If the fixed cost of launching the new foam will be €100,000 during the first year, should Hair Zone add the new product to its line? Why or why not?
Sigma Company produces high-quality PCs using the just-in-time (JIT) production method. The market has grown significantly overthe pastfew years and is expected to grow continuously. They are planning to launch a new model called “Epic”. The introduction of Epic will have no impact on sales of existing models as it is expected to appeal to a different segment of themarket. The company has already spent Rs.2 million on marketing the new model further requires an investment of Rs.20 million in production equipment. The project has a life of five years and the depreciation is calculated using the straight-line method. Sales and production of the Epic over its lifecycle are expected to be as follows. Year 01 02 03 04 05Units of sales 200 400 500 650 800 The selling price in Year 1 and Year 2 will be Rs. 50,000 per unit. The selling price will be reduced to Rs. 40,000 from year 3. The total variable cost of the Epic, including…
Chan’s Spring Roll (CSR), a seller of frozen spring roll, is considering introducing a healthier version of its product that will be low in sugar and gluten-free. The firm expects that sales of the new spring roll will be $20 million per year. While many of these sales will be to new customers, CSR estimates that 50% will come from customers who switch to the new, healthier spring roll instead of buying the original version. Suppose that 25% of the customers who would switch from CSR’s original spring roll to its healthier version will switch to another brand if CSR does not introduce a healthier spring roll. What level of incremental sales is associated with introducing the new spring roll in this case? $15 million $10 million $17.5 million $12.5 million
Burger King is looking to introduce a new veggie burger in Berwyn. Their analysts estimate that they will sell 12,000 veggie burgers per year. The unit cost per veggie burger is $0.58 and they plan on selling it for $2.5. If the current sales of meat burgers go down from 34,200 units per year to 28,600 units, what is the erosion cost? Assume that a meat burger costs $0.48 to produce and it sells for $2.0. Group of answer choices $12,511.00 $10,179.00 $2,978.00 $9,728.00 $8,512.00 Only typing answer Please answer explaining in detail step by step without table and graph thankyou
Pisa Pizza, a seller of frozen pizza, is considering introducing a healthier version of its pizza that will be low in cholesterol and contain no trans fats. The firm expects that sales of the new pizza will be $24 million per year. While many of these sales will be to new customers, Pisa Pizza estimates that 35% will come from customers who switch to the new, healthier pizza instead of buying the original version. a. Assume customers will spend the same amount on either version. What level of incremental sales is associated with introducing the new pizza? b. Suppose that 52% of the customers who will switch from Pisa Pizza's original pizza to its healthier pizza will switch to another brand if Pisa Pizza does not introduce a healthier pizza. What level of incremental sales is associated with introducing the new pizza in this case? a. Assume customers will spend the same amount on either version. What level of incremental sales is associated with introducing the new pizza? The…
Pisa Pizza, a seller of frozen pizza, is considering introducing a healthier version of its pizza that will be low in cholesterol and contain no trans fats. The firm expects that sales of the new pizza will be $20 million per year. While many of these sales will be to new customers, Pisa Pizza estimates that 40% will come from customers who switch to the new, healthier pizza instead of buying the original version. Assume customers will spend the same amount on either version. What level of incremental sales is associated with introducing the new pizza? Suppose that 50% of the customers who will switch from Pisa Pizza’s original pizza to its healthier pizza will switch to another brand if Pisa Pizza does not introduce a healthier pizza. What level of incremental sales is associated with introducing the new pizza in this case?
Expo Lube is interested in producing and selling an industrial line of oil filters. Market research indicates that wholesale customers are currently willing to pay $8 for similar filters, and that Expo Lube could sell 80,000 units per year at that price. a. If Expo Lube requires a 21 percent return on sales, what is its target cost for the proposed industrial line of filters? b. Assume that market research reveals several of Expo Lube’s direct competitors are likely to lower the wholesale price of similar filters to $7 per unit. To remain competitive, what will Expo Lube’s target cost have to be to maintain a 21 percent return on sales? c. At a wholesale price of $7, Expo Lube estimates that it can sell 83,800 industrial filters per year instead of 80,000 units. Assuming its target costs are attainable, how much more or less profit per year will the company earn at the $7 wholesale price compared to the initial wholesale price estimate of $8?
Meyerson’s Bakery is considering the addition of a new line of pies to its product offerings. However, the following scenarios could be faced by this Bakery for the new line: First scenario: It is expected that each pie will sell for $17 and the variable costs per pie will be $11. Total fixed operating costs are expected to be $25,000. Meyerson’s faces a marginal tax rate of 25%, will have interest expense associated with this line of $3,500, and expects to sell about 4,500 pies in the first year. Second scenario: It is expected that each pie will sell for $15 and the variable costs per pie will be $9. Total fixed operating costs are expected to be $20,000. Meyerson’s faces a marginal tax rate of 35%, will have interest expense associated with this line of $3,000, and expects to sell about 4,000 pies in the first year. 1. Under the first scenario, How many pies would Meyerson’s need to sell in order to achieve EBIT of $20,000? (EBIT = Earnings Before Interest and Taxes).…

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