Managerial Accounting
3rd Edition
ISBN: 9780077826482
Author: Stacey M Whitecotton Associate Professor, Robert Libby, Fred Phillips Associate Professor
Publisher: McGraw-Hill Education
expand_more
expand_more
format_list_bulleted
Concept explainers
Videos
Textbook Question
Chapter 4, Problem 19E
Calculating Target Cost
Majesty Company uses target costing to ensure its products are profitable. Assume majesty is planning to introduce a new product with the following estimates:
Required:
1. Compute the target cost of this product.
2. Compute the target cost if Majesty wants a 40 percent return on sales.
3. Compute the target cost if Majesty wants a 15 percent return on sales.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
Majesty Company uses target costing to ensure that its products are profitable. Assume Majesty is planning to introduce a new
product with the following estimates:
Estimated market price
Annual demand
Life cycle
Target profit
$ 2,900
92,000 units
years
1. Target Cost
2. Target Cost
3. Target Cost
5
27 percentage return on sales
Required:
1. Compute the target cost of this product.
2. Compute the target cost if Majesty wants a 44 percent return on sales.
3. Compute the target cost if Majesty wants a 7 percent return on sales.
4
Refer to the pictur ebelow:
Find:
1. Total Cost of Product A under ABC System2. Total Cost of Product B under ABC System3. Selling Price per unit of Product B assuming profit margin of 20% above cost
CVP Analysis using a chart:
The cost-volume-profit chart for Byron Manufacturing is shown. Use the graph to complete the sentences given below.
SALES AND COSTS (Dollars)
20000
Sales
15000
Total Costs
10000
5000
100 200 300 400 500 600 700 800 900 1000
UNITS OF SALES
Byron Manufacturing reaches its break-even level of activity when it sells 500
-v units and generates $12,000
v in revenue, because at this level of activity the firm's revenue equals
-v its total cost. In addition, you can
determine from the chart that Byron Manufacturing's fixed costs are $6,000
-v and its price per unit is $24.00
V and variable cost per unit is $12.00
If fixed costs increase, what will happen to the break-even point?
The break-even point will increase.
If the price per unit decreases, what will happen to the break-even point?
The break-even point will increase.
Chapter 4 Solutions
Managerial Accounting
Ch. 4 - What is the difference between a volume-based cost...Ch. 4 - Explain the statement that traditional costing...Ch. 4 - Prob. 3QCh. 4 - How does activity-based costing differ from...Ch. 4 - What types of business might use activity-based...Ch. 4 - Prob. 6QCh. 4 - Prob. 7QCh. 4 - Prob. 8QCh. 4 - Why must costs be classified into different...Ch. 4 - Prob. 10Q
Ch. 4 - Prob. 11QCh. 4 - Explain the difference between the activity-rate...Ch. 4 - Define activity-based management and explain how...Ch. 4 - Prob. 14QCh. 4 - Prob. 15QCh. 4 - What is non-value-added activity. Considering the...Ch. 4 - Prob. 17QCh. 4 - Prob. 18QCh. 4 - Prob. 19QCh. 4 - Prob. 20QCh. 4 - Prob. 1MCCh. 4 - Both traditional and ABC cost systems focus on...Ch. 4 - Prob. 3MCCh. 4 - Number of setups is an example of a a. Unit-level...Ch. 4 - Prob. 5MCCh. 4 - Prob. 6MCCh. 4 - Prob. 7MCCh. 4 - Prob. 8MCCh. 4 - Prob. 9MCCh. 4 - Prob. 10MCCh. 4 - Prob. 1MECh. 4 - Prob. 2MECh. 4 - Prob. 3MECh. 4 - Identifying terms in ABC and ABM Use the following...Ch. 4 - Prob. 5MECh. 4 - Prob. 6MECh. 4 - Assigning Costs Using Activity Proportions Refer...Ch. 4 - Calculating Activity Rates for ABC System Lakeside...Ch. 4 - Prob. 9MECh. 4 - Prob. 10MECh. 4 - Prob. 11MECh. 4 - Prob. 12MECh. 4 - Classifying Activities According to Level,...Ch. 4 - Prob. 2ECh. 4 - Prob. 3ECh. 4 - Assigning Costs Using Activity Rates Refer to the...Ch. 4 - Prob. 5ECh. 4 - Prob. 6ECh. 4 - Prob. 7ECh. 4 - Prob. 8ECh. 4 - Prob. 9ECh. 4 - Prob. 10ECh. 4 - Comparing Traditional Costing Systems and...Ch. 4 - Prob. 12ECh. 4 - Prob. 13ECh. 4 - Prob. 14ECh. 4 - Prob. 15ECh. 4 - Identifying Value-Added and Non-Value-Added...Ch. 4 - Prob. 17ECh. 4 - Prob. 18ECh. 4 - Calculating Target Cost Majesty Company uses...Ch. 4 - Assigning Costs using Traditional System, ABC...Ch. 4 - Assigning Costs using Traditional System, ABC...Ch. 4 - Prob. 1.3GAPCh. 4 - Prob. 1.4GAPCh. 4 - Prob. 1.5GAPCh. 4 - Prob. 2.1GAPCh. 4 - Prob. 2.2GAPCh. 4 - Prob. 2.3GAPCh. 4 - Prob. 2.4GAPCh. 4 - Prob. 2.5GAPCh. 4 - Prob. 3.1GAPCh. 4 - Prob. 3.2GAPCh. 4 - Prob. 3.3GAPCh. 4 - Prob. 3.4GAPCh. 4 - Prob. 3.5GAPCh. 4 - Prob. 3.6GAPCh. 4 - Prob. 3.7GAPCh. 4 - Prob. 3.8GAPCh. 4 - Prob. 4.1GAPCh. 4 - Describing the Impact of ABM and TQM on a Company...Ch. 4 - Prob. 4.3GAPCh. 4 - Prob. 4.4GAPCh. 4 - Describing the Impact of ABM and TQM on a Company...Ch. 4 - Prob. 4.6GAPCh. 4 - Prob. 4.7GAPCh. 4 - Prob. 4.8GAPCh. 4 - Prob. 5.2GAPCh. 4 - Prob. 1.1GBPCh. 4 - Prob. 1.2GBPCh. 4 - Prob. 1.3GBPCh. 4 - Prob. 1.4GBPCh. 4 - Prob. 1.5GBPCh. 4 - Prob. 2.1GBPCh. 4 - Prob. 2.2GBPCh. 4 - Prob. 2.3GBPCh. 4 - Prob. 2.4GBPCh. 4 - Prob. 2.5GBPCh. 4 - Prob. 3.1GBPCh. 4 - Selecting Cost Drivers, Assigning Costs using...Ch. 4 - Prob. 3.3GBPCh. 4 - Prob. 3.4GBPCh. 4 - Prob. 3.5GBPCh. 4 - Prob. 3.6GBPCh. 4 - Prob. 3.7GBPCh. 4 - Prob. 3.8GBPCh. 4 - Prob. 4.1GBPCh. 4 - Prob. 4.2GBPCh. 4 - Prob. 4.3GBPCh. 4 - Prob. 4.4GBPCh. 4 - Selecting Cost Drivers, Assigning Costs Using...Ch. 4 - Prob. 4.6GBPCh. 4 - Prob. 4.7GBPCh. 4 - Prob. 4.8GBPCh. 4 - Defining Concepts of Target Costing, Just-in-Time,...Ch. 4 - Defining Concepts of Target Costing, Just-in-Time,...
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Similar questions
- Wilderness Products, Incorporated, has designed a self-inflating sleeping pad for use by backpackers and campers. The following information is available about the new product: a. An investment of $1,350,000 will be necessary to carry inventories and accounts receivable and to purchase some new equipment needed in the manufacturing process. The company's required rate of return is 24% on all investments. b. A standard cost card has been prepared for the sleeping pad, as shown below: Direct materials Direct labor Manufacturing overhead (20% variable) Total standard cost per pad Standard Quantity or Hours 4.0 yards 2.4 hours 2.4 hours Standard Price or Rate $2.70 per yard $8.00 per hour $12.50 per hour Standard Cost $10.80 19.20 30.00 $ 60.00 c. The only variable selling and administrative expense will be a sales commission of $9 per pad. The fixed selling and administrative expenses will be $732,000 per year. d. Because the company manufactures many products, no more than 38,400 direct…arrow_forwardAssume that a company uses the absorption costing approach to cost-plus pricing. It is considering the introduction of a new product. To determine a selling price, the company has gathered the following information: Number of units to be produced and sold each year Unit product cost Estimated annual selling and administrative expenses Estimated investment required by the company Desired return on investment (ROI) What is the markup percentage on absorption cost required to achieve the desired ROI? 15,000 30 $ $81,900 $780,000 12%arrow_forwardThe total cost formula for a company can be modeled by TC = 12570+ 50x where x represents the number of items sold. A formula for the company's total income is modeled with TR 80x, where a represents the number of items sold. This company will breakeven when its total costs equal its total income. - How many items must this company sell to breakeven? Answer:arrow_forward
- Absorption Costing Approach to Cost-Plus Pricing Martin Company uses the absorption costing approach to cost-plus pricing. It is considering the introduction of a new product. To determine a selling price, the company has gathered the following information: Required: 1. Compute the markup percentage on absorption cost required to achieve the desired ROI. 2. Compute the selling price per unit.arrow_forward1. Identify the pricing strategy that is being used by the company. 2. 8Wave would have many costs involved in running their business. List 10-15 costs that 8Wave would have. 3. Explain why the “Off-Season” price is generally more expensive than “Summer Season.” 4. Estimate the percentage mark-up that 8Wave puts on top of its cost to find the final price. Justify your answer.arrow_forwardMarigold Corp. is using the target cost approach on a new product. Information gathered so far is as follows: Expected annual sales Desired profit per unit Target cost What is the unit selling price? O $0.30 O $0.64 O $0.62 O $0.32 500000 units $0.32 $150000arrow_forward
- Your manager would like you to conduct sensitivity analysis to see how changing both the price and unit cost of a product affect profits. The following data is provided to you. Which of the following actions needs to be completed before building a data table? 26 27 Price 28 Demand 29 Unit cost 30 Fixed cost 31 Revenue 32 Variable cost 33 Profit B с 50.00 28,000.0 12.00 D E Copied Cells 50.0 62,000.0 1,400,000.0=C28 C27 336,000.0=C28 C29 1,798,000.0 SUM(C31,C32.C30) Select one: The incorrect cells have been 'copied' and this will result in a 12.0arrow_forwardCompany XYZ sells two products: AAA and BBB. Product BBB has a lower selling price but higher contribution margin compared to product AAA. Assume that the factory has fixed production capacity. If Company XYZ decided to produce and sell more units of product BBB compared to product AAA, which one of the following is likely to happen? Select one: O a. Total profits will remain the same O b. Total profits will decrease O c. Total profit will increase O d. None of the given answers O e. Total sales will increasearrow_forwardSFS manufactures and sells a range of products. It is not dominant in the market in which it operates and, as a result, it has to accept the market price for each of its products. The company is keen to ensure that it continues to compete and earn satisfactory profit at each stage throughout a product's life cycle. REQUIRED: Distinguish how SFS could use Target Costing and Kaizen Costing to improve its future performance. Your answer should include an explanation of the differences between Target Costing and Kaizen Costing.arrow_forward
- A company manufactures a single product, product Y. It hasdocumented levels of demand at certain selling prices for thisproduct as follows: Demand Selling price per unit Cost per unit Units £ £ 1100 48 24 1200 46 21 1300 45 20 1400 42 19 Required:Using a tabular approach, calculate the marginal revenues andmarginal costs for product Y at the different levels of demand, andso determine the selling price at which the company profits aremaximized.arrow_forwardMegacorp and Gadgetron are two competing gadget manufacturers. Information about the price and cost structures of the two manufacturers are given below. Megacorp Gadgetron Selling price per unit 160 160 Variable cost per unit 110 80 Fixed cost per month 46,000 100,000 Required: Calculate the sales volume that will result in Megacorp and Gadgetron having the same operating profit. Prepare a profit-volume graph by plotting profit as a function of the sales volume.Hint: Identify the point where sales volume is zero (i.e., fixed cost on y-intercept) and the break-even point (i.e., x-intercept where profit is zero) and connect the dots.arrow_forwardWhat is the selling price Sweet Tastings needs to charge to earn the target operating income? Calculate the markup percentage on full cost.arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Managerial AccountingAccountingISBN:9781337912020Author:Carl Warren, Ph.d. Cma William B. TaylerPublisher:South-Western College Pub
Financial And Managerial AccountingAccountingISBN:9781337902663Author:WARREN, Carl S.Publisher:Cengage Learning,
Financial Reporting, Financial Statement Analysis...FinanceISBN:9781285190907Author:James M. Wahlen, Stephen P. Baginski, Mark BradshawPublisher:Cengage Learning
Cornerstones of Cost Management (Cornerstones Ser...AccountingISBN:9781305970663Author:Don R. Hansen, Maryanne M. MowenPublisher:Cengage Learning
Essentials of Business Analytics (MindTap Course ...StatisticsISBN:9781305627734Author:Jeffrey D. Camm, James J. Cochran, Michael J. Fry, Jeffrey W. Ohlmann, David R. AndersonPublisher:Cengage Learning
Managerial Accounting
Accounting
ISBN:9781337912020
Author:Carl Warren, Ph.d. Cma William B. Tayler
Publisher:South-Western College Pub
Financial And Managerial Accounting
Accounting
ISBN:9781337902663
Author:WARREN, Carl S.
Publisher:Cengage Learning,
Financial Reporting, Financial Statement Analysis...
Finance
ISBN:9781285190907
Author:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw
Publisher:Cengage Learning
Cornerstones of Cost Management (Cornerstones Ser...
Accounting
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Cengage Learning
Essentials of Business Analytics (MindTap Course ...
Statistics
ISBN:9781305627734
Author:Jeffrey D. Camm, James J. Cochran, Michael J. Fry, Jeffrey W. Ohlmann, David R. Anderson
Publisher:Cengage Learning
Cost Accounting - Definition, Purpose, Types, How it Works?; Author: WallStreetMojo;https://www.youtube.com/watch?v=AwrwUf8vYEY;License: Standard YouTube License, CC-BY