Product BW of Blair Designs generates sales revenue of $40,000. The product incurs variable costs of goods sold of $22,000, fixed selling costs of $22,000, and fixed factory overhead of $21,000. Determine if Product BW should be continued or discontinued. Assume that the company will incur the fixed factory overhead regardless of the decision. Support your conclusion with numbers. The fixed selling cost is avoidable.

Product BW of Blair Designs generates sales revenue of $40,000. The product incurs variable costs of goods sold of $22,000, fixed selling costs of $22,000, and fixed factory overhead of $21,000. Determine if Product BW should be continued or discontinued. Assume that the company will incur the fixed factory overhead regardless of the decision. Support your conclusion with numbers. The fixed selling cost is avoidable.

Essentials of Business Analytics (MindTap Course List)

2nd Edition

ISBN:9781305627734

Author:Jeffrey D. Camm, James J. Cochran, Michael J. Fry, Jeffrey W. Ohlmann, David R. Anderson

Publisher:Jeffrey D. Camm, James J. Cochran, Michael J. Fry, Jeffrey W. Ohlmann, David R. Anderson

Chapter11: Linear Optimization Models

Section: Chapter Questions

Problem 10P: The management of Hartman Company is trying to determine the amount of each of two products to...

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DK manufactures three products, W, X and Y. Each product uses the same materials and the same type of direct labour but in different quantities. The company currently uses a cost-plus basis to determine the selling price of its products. This is based on full cost using an overhead absorption rate per direct labour hour. However, the managing director is concerned that the company may be losing sales because of its approach to setting prices. He thinks that a marginal costing approach may be more appropriate, particularly since the workforce is guaranteed a minimum weekly wage and has a three month notice period.
DK manufactures three products, W, X and Y. Each product uses the same materials and the same type of direct labour but in different quantities. The company currently uses a cost plus basis to determine the selling price of its products. This is based on full cost using an overhead absorption rate per direct labour hour. However, the managing director is concerned that the company may be losing sales because of its approach to setting prices. He thinks that a marginal costing approach may be more appropriate, particularly since the workforce is guaranteed a minimum weekly wage and has a three month notice period. Required: a) Given the managing director’s concern about DK’s approach to setting selling prices, discuss the advantages and disadvantages of marginal cost plus pricing AND total cost-plus pricing. The direct costs of the three products are shown below: Product W X Y Budgeted annual production (units) 15,000 24,000 20,000 $ per unit $ per unit $ per unit Direct materials…
DK manufactures three products, W, X and Y. Each product uses the same materials and the same type of direct labour but in different quantities. The company currently uses a cost plus basis to determine the selling price of its products. This is based on full cost using an overhead absorption rate per direct labour hour. However, the managing director is concerned that the company may be losing sales because of its approach to setting prices. He thinks that a marginal costing approach may be more appropriate, particularly since the workforce is guaranteed a minimum weekly wage and has a three month notice period.
DK manufactures three products, W, X and Y. Each product uses the same materials and the same type of direct labour but in different quantities. The company currently uses a cost plus basis to determine the selling price of its products. This is based on full cost using an overhead absorption rate per direct labour hour. However, the managing director is concerned that the company may be losing sales because of its approach to setting prices. He thinks that a marginal costing approach may be more appropriate, particularly since the workforce is guaranteed a minimum weekly wage and has a three month notice period. The direct costs of the three products are shown below: notice period. product w x y Budgeted annual production (units) 15,000 24,000 20,000 $ per unit $ per unit $ per unit Direct materials 35 40 45 Direct labour ($10 per hour) 40 30 50 In addition to the above direct costs, DK incurs annual indirect production costs of $1,044,000. a)Calculate the…
DK manufactures three products, W, X and Y. Each product uses the same materials and the same type of direct labour but in different quantities. The company currently uses a cost plus basis to determine the selling price of its products. This is based on full cost using an overhead absorption rate per direct labour hour. However, the managing director is concerned that the company may be losing sales because of its approach to setting prices. He thinks that a marginal costing approach may be more appropriate, particularly since the workforce is guaranteed a minimum weekly wage and has a three month notice period. Required: a) Given the managing director's concern about DK's approach to setting selling prices, discuss the advantages and disadvantages of marginal cost plus pricing AND total cost-plus pricing. The direct costs of the three products are shown below: Product W Y Budgeted annual production (units) 15,000 24,000 20,000 $ per unit $ per unit $ per unit Direct materials 35 40…
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DK manufactures three products, W, X and Y. Each product uses the same materials and the same type of direct labour but in different quantities. The company currently uses a cost plus basis to determine the selling price of its products. This is based on full cost using an overhead absorption rate per direct labour hour. However, the managing director is concerned that the company may be losing sales because of its approach to setting prices. He thinks that a marginal costing approach may be more appropriate, particularly since the workforce is guaranteed a minimum weekly wage and has a three month notice period. Required: Given the managing director’s concern about DK’s approach to setting selling prices, discuss the advantages and disadvantages of marginal cost plus pricing AND total cost-plus pricing. * please help me to answer this question in details, thanks
DK manufactures three products, W, X and Y. Each product uses the same materials and the same type of direct labour but in different quantities. The company currently uses a cost plus basis to determine the selling price of its products. This is based on full cost using an overhead absorption rate per direct labour hour. However, the managing director is concerned that the company may be losing sales because of its approach to setting prices. He thinks that a marginal costing approach may be more appropriate, particularly since the workforce is guaranteed a minimum weekly wage and has a three month notice period. Required: a) Given the managing director's concern about DK's approach to setting selling prices, discuss the advantages and disadvantages of marginal cost plus pricing AND total cost-plus pricing. The direct costs of the three products are shown below: Product W Y Budgeted annual production (units) 15,000 24,000 20,000 $ per unit $ per unit $ per unit Direct materials 35 40…
DK manufactures three products, W, X and Y. Each product uses the same materials and the same type of direct labour but in different quantities. The company currently uses a cost plus basis to determine the selling price of its products. This is based on full cost using an overhead absorption rate per direct labour hour. However, the managing director is concerned that the company may be losing sales because of its approach to setting prices. He thinks that a marginal costing approach may be more appropriate, particularly since the workforce is guaranteed a minimum weekly wage and has a three month notice period. Required: a) Given the managing director’s concern about DK’s approach to setting selling prices, discuss the advantages and disadvantages of marginal cost plus pricing AND total cost-plus pricing.
DK manufactures three products, W, X and Y. Each product uses the same materials and the same type of direct labour but in different quantities. The company currently uses a cost plus basis to determine the selling price of its products. This is based on full cost using an overhead absorption rate per direct labour hour. However, the managing director is concerned that the company may be losing sales because of its approach to setting prices.He thinks that a marginal costing approach may be more appropriate, particularly since the workforce is guaranteed a minimum weekly wage and has a three month notice period. Required:a) Given the managing director’s concern about DK’s approach to setting selling prices, discuss the advantages and disadvantages of marginal cost plus pricing AND total cost-plus pricing. The direct costs of the three products are shown below: Product W X Y Budgeted annual production (units) 15,000 24,000 20,000 $ per unit $ per unit $ per unit Direct…