a)
Product pricing: Product pricing is the method used for fixing the price for the products sold or the services offered to the consumers.
Product cost pricing: Product cost pricing is a pricing technique which sums up the costs involved in the production of the product alone and the markup is added to the sum.
Product Cost per unit = Total Product CostEstimated Units Produced and sold
Total cost pricing: Total cost pricing is a pricing technique which sums up all the costs involved in the production of the product and the markup is added to the sum.
Total Variable Cost: Total variable cost refers to the costs involved in the production of the product.
Markup Percentage: The markup percentage is the percentage of additional costs added to the product cost to get the selling price of the product.
Markup Percentage = (DesiredProfit) + (Total Selling andAdmininstrative Expenses)Total Product Cost
Selling Price: Selling price is calculated by summing up the product cost per unit and the per unit markup cost
To Determine: The desired profit of Company CD.
a)
Explanation of Solution
Desired Profit: Company CD aims at earning a profit of 15% of the total investment made of $1,500,000.
Calculate the desired profit of Company CD.
Desired profit = 15% of Invested assets= $1,500,000 × 15%= $1,500,000 × 15100= $255,000
Hence, the desired profit of Company CD is $225,000
b)
On the basis of product cost concept, for Company CD
- i. Cost per unit
- ii. Markup percentage
- iii. Selling price of flat panel displays
b)
Explanation of Solution
Product cost pricing: Product cost pricing is a pricing technique which sums up the costs involved in the production of the product alone and the markup is added to the sum.
i)
Calculate the cost per unit of flat panel display.
| Variable Cost (1) | $1,000,000 |
| Fixed Cost | $250,000 |
| Total | $1,250,000 |
| Divide by: Number of units | 5,000 |
| Cost per unit | $250 |
Hence, the cost per unit of flat panel display is $250.
Working Note:
Calculate the variable cost.
Varaible Cost=(Direct Materials+Direct Labor+Factory Overhead) ×5000 units=($120+$30+$50) ×5,000 units= $200 ×5,000 units= $1,000,000 (1)
c)
On the basis of total cost concept, for Company CD
- i. Cost per unit
- ii. Markup percentage
- iii. Selling price of flat panel displays
c)
Explanation of Solution
Total cost pricing: Total cost pricing is a pricing technique which sums up all the costs involved in the production of the product and the markup is added to the sum.
i)
Calculate the cost per unit of flat panel display.
| Variable Cost ($235×5,000 units) | $1,175,000 |
| Fixed Cost ($250,000 + $150,000) | $400,000 |
| Total | $1,575,000 |
| Divide by: Number of units | 5,000 |
| Cost per unit | $315 |
Hence, the cost per unit of flat panel display is $315.
d)
On the basis of variable cost concept, for Company CD
- i. Cost per unit
- ii. Markup percentage
- iii. Selling price of flat panel displays
d)
Explanation of Solution
Total Variable Cost: Total variable cost refers to the costs involved in the production of the product.
i)
Variable cost per unit of flat panel display is $235.
Total variable cost of flat panel display is $1,175,000 ($235 ×5,000 units).
iii)
Calculate the selling price per unit of flat panel display
| Cost per unit | $235 |
| Markup per unit ($235 ×53.19%) | $125 |
| Selling price per unit | $360 |
Hence, the selling price per unit of flat panel display is $360.
e)
To Comment: On any other considerations that would influence the price of flat panel display.
iii)
Calculate the selling price per unit of flat panel display
| Cost per unit | $235 |
| Markup per unit ($235 ×53.19%) | $125 |
| Selling price per unit | $360 |
Hence, the selling price per unit of flat panel display is $360.
e)
Explanation of Solution
Calculate the selling price per unit of flat panel display
| Cost per unit | $235 |
| Markup per unit ($235 ×53.19%) | $125 |
| Selling price per unit | $360 |
Hence, the selling price per unit of flat panel display is $360.
F (i)
To Prepare: The differential analysis of Company CD, for the proposed offer to either accept or reject it.
F (i)
Explanation of Solution
Prepare the differential analysis for Company CD for the given alternatives.
| Differential Analysis of Company CD | |||
| Reject Order (Alt 1) or Accept Order (Alt 2) | |||
| August 03 | |||
| Reject Order (Alternative 1) | Accept Order (Alternative 1) | Differential Effect on income | |
| Revenues | $0 | $180,000 | $180,000 |
| Costs | |||
| Variable |
$0 | (2) (-) $152,000 | (-) $152,000 |
| Income (loss), per unit | $0 | $28,000 | $28,000 |
Table (1)
The differential analysis of Company CD shows a profit of $28,000 on accepting the offer, hence the offer should be accepted.
Working Note:
Calculate the variable manufacturing cost.
Varaible Manufacturing Cost=(Offer price − Selling andAdministrative Expenses) ×800 units=($225 −$35) ×800 units= $190 ×800 units= $152,000 (2) ii)
Want to see more full solutions like this?
Chapter 24 Solutions
Working Papers, Volume 1, Chapters 1-15 for Warren/Reeve/Duchac's Corporate Financial Accounting, 13th + Financial & Managerial Accounting, 13th
- ansmayolga me edi bio JO NAT CALCULATING PAYROLL TAXES EXPENSE AND PREPARING JOURNAL ENTRY Selected information from the payroll register of Ebeling's Dairy for the week ended July 7, 20--, is shown below. The SUTA tax rate is 5.4%, and the FUTA tax rate is 0.6%, both on the first $7,000 of earnings. Social Security tax on the employer is 6.2% on the first $128,400 of earnings, and Medicare tax is 1.45% on gross earnings. Taxable Earnings 0.0 dmatge2 to 26 oll evolqis gas basM BY Cumulative Pay Before Current Earnings 600 dad no Click, Katelyn 1 ATUT $ 6,650 $ 800 onibbs Employee Name Coombs, Michelle ol noam Fauss, Erin Lenihan, Marcus A9 6,370 Current (SVO) Aeg Weekly Unemployment Social Earnings Compensation Security 720 repare the jour entry to ended 900 S 011200133,460 33,460 tumo 1,200 AY McMahon, Drew MYA Я0 obsH Newell, Margballe aid ni Stevens, Matt basing 210 6,930 127,050 JAЯ4,440 35,470 R 38,675 80 K ed July 15 of the cur (EOJ) A2-03 2E212 3/20 1,110 YER PAYROLL TAXES Eam-…arrow_forwardDear tutor solve with appropriate method.arrow_forwardI need help with this general accounting question using the proper accounting approach.arrow_forward
Managerial Accounting: The Cornerstone of Busines...AccountingISBN:9781337115773Author:Maryanne M. Mowen, Don R. Hansen, Dan L. HeitgerPublisher:Cengage Learning
Managerial AccountingAccountingISBN:9781337912020Author:Carl Warren, Ph.d. Cma William B. TaylerPublisher:South-Western College Pub
Principles of Cost AccountingAccountingISBN:9781305087408Author:Edward J. Vanderbeck, Maria R. MitchellPublisher:Cengage Learning
Survey of Accounting (Accounting I)AccountingISBN:9781305961883Author:Carl WarrenPublisher:Cengage Learning