Intermediate Accounting, 10 Ed
10th Edition
ISBN: 9781260310177
Author: Mark W. Nelson, Wayne B. Thomas J. David Spiceland
Publisher: McGraw-Hill Education
expand_more
expand_more
format_list_bulleted
Concept explainers
Videos
Textbook Question
Chapter 6, Problem 6.22BE
Estimating stand-alone selling prices: expected cost plus margin approach
• LO5–6
O’Hara Associates sells golf clubs, and with each sale of a full set of clubs provides complementary club-fitting services. A full set of clubs with the fitting services sells for $1,500. O’Hara estimates that it incurs $60 of staff compensation and other costs to provide the fitting services, and normally earns 30% over cost on similar services. Assuming that the golf clubs and the club-fitting services are separate performance obligations, estimate the stand-alone selling price of the club-fitting services using the expected cost plus margin approach.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
PROBLEM 8. The Color Company manufactures and sells two
products. The selling prices and variable costs of the products
are as follows:
Blujets Blupens
P20
Selling prices
Variable costs
P40
8
24
The sales for 2021 were in the ratio of 3 Blujets to 1 Blupen.
Sales volume for 2021 was P1 million. Fixed costs for 2020
amounted to P390,000.
Requirements:
4. If the sales mix was to change to 2 units of blujets to 1 unit
of Blupen, would this have any effect on the breakeven
sales? If so, what would be the new breakeven sales?
5. Assuming that the sales volume would remain at P1
million, what net income would be generated using the
sales mix in number (4) above?
6. What sales revenue would be required if the firm wishes to
generate a net income of P328,900 if the original mix of 3:1
prevailed?
PROBLEM 8. The Color Company manufactures and sells two
products. The selling prices and variable costs of the products
are as follows:
Blujets
Blupens
Selling prices
Variable costs
P20
P40
8
24
The sales for 2021 were in the ratio of 3 Blujets to 1 Blupen.
Sales volume for 2021 was P1 million. Fixed costs for 2020
amounted to P390,000.
Requirements:
1. Compute the number of units sold in 2021 for each
product.
2. Compute the breakeven sales in pesos and in units.
3. Compute the composite breakeven for the company.
A company sells two products in the ratio 2:1
A B
£ £
Selling price 2030
Variable costs 10 15
Given that fixed costs are £500,000, how many products in total will have to be
sold to break even?
Select one:
O a. 50,000
O b. 35,000
O c. 42,500
O d. 45,000
Questio
Not yet
Marked
Flag
Chapter 6 Solutions
Intermediate Accounting, 10 Ed
Ch. 6 - What are the five key steps a company follows to...Ch. 6 - What indicators suggest that a performance...Ch. 6 - What criteria determine whether a company can...Ch. 6 - We recognize service revenue either at one point...Ch. 6 - What characteristics make a good or service a...Ch. 6 - Prob. 6.6QCh. 6 - What must a contract include for the contract to...Ch. 6 - How might the definition of probable affect...Ch. 6 - When a contract includes an option to buy...Ch. 6 - Prob. 6.10Q
Ch. 6 - Prob. 6.11QCh. 6 - Is a customers right to return merchandise a...Ch. 6 - Prob. 6.13QCh. 6 - Under what circumstances should sellers consider...Ch. 6 - When should a seller view a payment to its...Ch. 6 - What are three methods for estimating stand-alone...Ch. 6 - When is revenue recognized with respect to...Ch. 6 - In a franchise arrangement, what are a franchisors...Ch. 6 - When does a company typically recognize revenue...Ch. 6 - Prob. 6.20QCh. 6 - Prob. 6.21QCh. 6 - Prob. 6.22QCh. 6 - Must bad debt expense be reported on its own line...Ch. 6 - Explain the difference between contract assets,...Ch. 6 - Explain how to account for revenue on a long-term...Ch. 6 - Prob. 6.26QCh. 6 - Prob. 6.27QCh. 6 - Timing of revenue recognition LO53 Estate...Ch. 6 - Allocating the transaction price LO54 Sarjit...Ch. 6 - Existence of a contract LO5-5 Tulane Tires wrote...Ch. 6 - Prob. 6.6BECh. 6 - Prob. 6.7BECh. 6 - Performance obligations; warranties LO55 Vroom...Ch. 6 - Prob. 6.9BECh. 6 - Prob. 6.10BECh. 6 - Variable consideration LO56 Leo Consulting enters...Ch. 6 - Prob. 6.16BECh. 6 - Prob. 6.17BECh. 6 - Prob. 6.18BECh. 6 - Prob. 6.19BECh. 6 - Prob. 6.20BECh. 6 - Prob. 6.21BECh. 6 - Estimating stand-alone selling prices: expected...Ch. 6 - Estimating stand-alone selling prices; residual...Ch. 6 - Prob. 6.24BECh. 6 - Prob. 6.25BECh. 6 - Contract assets and contract liabilities LO58...Ch. 6 - Long-term contract; revenue recognition over time;...Ch. 6 - Prob. 6.34BECh. 6 - Long-term contract; revenue recognition upon...Ch. 6 - Long-term contract; revenue recognition; loss on...Ch. 6 - Prob. 6.1ECh. 6 - Allocating transaction price LO54 Video Planet...Ch. 6 - Prob. 6.4ECh. 6 - Prob. 6.6ECh. 6 - Prob. 6.7ECh. 6 - Prob. 6.9ECh. 6 - Variable considerationmost likely amount; change...Ch. 6 - Variable considerationexpected value; change in...Ch. 6 - Prob. 6.12ECh. 6 - Prob. 6.13ECh. 6 - Prob. 6.14ECh. 6 - Approaches for estimating stand-alone selling...Ch. 6 - FASB codification research LO56, LO57 Access the...Ch. 6 - FASB codification research LO58 Access the FASB...Ch. 6 - Long-term contract; revenue recognition over time;...Ch. 6 - Prob. 6.1PCh. 6 - Prob. 6.2PCh. 6 - Prob. 6.3PCh. 6 - Prob. 6.5PCh. 6 - Variable consideration; change of estimate LO53,...Ch. 6 - Prob. 6.7PCh. 6 - Prob. 6.8PCh. 6 - Prob. 6.10PCh. 6 - Long-term contract; revenue recognition over time...Ch. 6 - Prob. 6.1DMPCh. 6 - Judgment Case 52 Satisfaction of performance...Ch. 6 - Judgment Case 53 Satisfaction of performance...Ch. 6 - Prob. 6.5DMPCh. 6 - Prob. 6.7DMPCh. 6 - Prob. 6.9DMPCh. 6 - Prob. 6.10DMPCh. 6 - Prob. 6.12DMPCh. 6 - Prob. 6.13DMPCh. 6 - Prob. 6.14DMPCh. 6 - Prob. 6.15DMPCh. 6 - Prob. 1CCTC
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
- QUESTION 20 A company sells mattresses for $390 each. To produce a batch of æ mattresses, there is a cost of $198 per mattress and a fixed or setup cost of $10,700 for the entire batch. Determine a function that gives the profit in terms of the number of mattresses produced. What will the company's profit be, in dollars, if they produce and sell 190 mattresses? Include a negative sign in your answer if the profit is negative. Provide your answer below:arrow_forwardChapter 7 Problem Solution 1 Please select the correct answer and solve and explain. "Goodstone Tire Corp sells tires for $90 each. Per unit costs associated with producing and selling the tires are: Direct Materials $35 Direct Labor $10 Factory Overhead $20 The variable portion of the factory overhead is $8 per unit. A foreign company wants to purchase 1,000 tires for $65 each. Assuming Goodstone has excess capacity: 1) The incremental profit from special order will be $12,000 2) The incremental loss from the special order will be $25,000 3) The will be no incremental loss or profit from the special orderarrow_forwardQS 25-17 (Algo) Pricing using total cost LO P6 José Ruiz starts a company that makes handcrafted birdhouses. Competitors sell a similar birdhouse for $240 each. Jose believes he can produce a birdhouse for a total cost of $205 per unit, and he plans a 20% markup on total cost. (a) Compute José's planned selling price (b) is Jose's price lower than competitors' price? Complete this question by entering your answers in the tabs below. Required A Required B Compute José's planned selling price. Selling price per unit Required B >arrow_forward
- Question 3 Ava's Creations sells two products. A and B. The weighted average per unit is $36 and Ava's fixed costs are $20300. The sales mix is 55% for A and 45% for B. How many units of Product A must be sold by Ava to break-even? <<< Question 3 of 9arrow_forwardQuestion 5 Micol & Co. Ltd sells a single product, baby hamper, with a selling price of $150 and variable costs per baby hamper of $100. The company’s monthly fixed expenses are $200,000. Required: a) What is the company’s break-even point in units? b) What is the company’s margin of safety in dollars, assume sales is expected to be $800,000? c) How many baby hampers will Micol & Co. Ltd need to sell (in sales dollars) in order to realize a target profit of $500,000? d) Construct a contribution margin income statement for the first month (in July) that reflects $2,400,000 in sales revenue for Micol & Co. Ltd. e) Provide two suggestions to Micol & Co. Ltd on how it can increase profit in subsequent months? SHOW YOUR WORKINGarrow_forwardstion 3 Ava's Creations sells two products. A and B. The weighted average per unit is $36 and Ava's fixed costs are $20300. The sales mix is 55% for A and 45% for B. How many units of Product A must be sold by Ava to break-even? <<< Question 3 of 9arrow_forward
- Exercise 6-15 (Algo) Approaches for estimating stand-alone selling prices [LO6-6] Video Planet (VP) sells a big screen TV package consisting of a 60-inch plasma TV, a universal remote, and on-site installation by VP staff. The installation includes programming the remote to have the TV interface with other parts of the customer's home entertainment system. VP concludes that the TV, remote, and installation service are separate performance obligations. VP sells the 60-inch TV separately for $1,790, sells the remote separately for $120, and offers the entire package for $1,980. VP does not sell the installation service separately. VP is aware that other similar vendors charge $170 for the installation service. VP also estimates that it incurs approximately $120 of compensation and other costs for VP staff to provide the installation service. VP typically charges 50% above cost on similar sales. Required: 1. to 3. Estimate the stand-alone selling price of the installation service using…arrow_forward#17 Konerko Company sells two types of computer chips. The sales mix is 30% (Q-Chip) and 70% (Q-Chip Plus). Q-Chip has variable costs per unit of P30 and a selling price of P50. Q-Chip Plus has variable costs per unit of P35 and a selling price of P65. The weighted-average unit contribution margin for Konerko is Group of answer choices P23. P25. P27. P50.arrow_forward-/1 View Policies Current Attempt in Progress Bramble Corp. sells two types of computer hard drives. The sales mix is 30% ( Q-Drive ) and 70% (Q-Drive Plus). Q-Drive has variable costs per unit of $60 and a selling price of $120. Q-Drive Plus has variable costs per unit of $90 and a selling price of $180. The weighted-average unit contribution margin for Bramble is O $120. O $60.0. O $81. O $69.0. TAvthaalkand iadis hparrow_forward
- ab. ock esc ~ Microhard produces tablets, laptops and televisions. Microhard typically sells 1,000 tablets a year. The tablet information is as follows: Selling price per unit Direct material cost per unit Direct labor cost per unit Total unavoidable allocated overhead How much would Operating Income decrease if Microhard were to eliminate the tablets? DO NOT INCLUDE PARENTHESES OR NEGATIVE SIGNS IN YOUR ANSWER. Click Save and Submit to save and submit. Click Save All Answers to save all answers. ! 1 Q A @ 2 W S $60 $30 $10 $48,000 #M 3 E $ 4 D R % от оро 5 F MacBook Pro < 6 T G & of r 7 Y H * 00 つarrow_forwardQUESTION 6 Wok Around the Clock, Inc., sells specialty woks. In the current year it expects to incur $810,000 in variable costs and $140,000 in fixed costs to make and sell 10,000 woks at $100 each. If Wok Around the Clock accepts a special order from Hard Wok Cafe to purchase 1,000 woks at $75. Wok Around the Clock will also have to pay $1,200 in shipping costs to deliver the special order. How much would it make or lose on this special order? ENTER A LOSS WITH A "-" SIGN. DO NOT USE PARENTHESES. EXAMPLE: -1,000 QUESTION 7 Daffy Duct, Inc., has the capacity to produce 12,000 cases of duct tape per year but only produces and sells 10,000 cases at $50 per case. The direct materials equals $130,000, direct labor equals $110,000, and overhead equals $100,000. Sixty percent of the manufacturing overhead is variable. The forty percent of fixed overhead is allocated equally to all products. Dewey, Cheatum & Howe has offered to purchase 1,000 cases but at a reduced price of $40 per case. What…arrow_forwardExercise 1 Gunung Jerai Sdn Bhd have the following information Price per unit: RM 20 ▪ Variable cost per unit : RM 15 ▪ Total Sale : RM 200 000 Total fixed cost : RM 40,000 ■ What is the DOL for Gunung Jerai Sdn Bhd at sales level at RM 200 000 ?arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
AccountingAccountingISBN:9781337272094Author:WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.Publisher:Cengage Learning,
Accounting Information SystemsAccountingISBN:9781337619202Author:Hall, James A.Publisher:Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis...AccountingISBN:9780134475585Author:Srikant M. Datar, Madhav V. RajanPublisher:PEARSON
Intermediate AccountingAccountingISBN:9781259722660Author:J. David Spiceland, Mark W. Nelson, Wayne M ThomasPublisher:McGraw-Hill Education
Financial and Managerial AccountingAccountingISBN:9781259726705Author:John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting PrinciplesPublisher:McGraw-Hill Education
Accounting
Accounting
ISBN:9781337272094
Author:WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:Cengage Learning,
Accounting Information Systems
Accounting
ISBN:9781337619202
Author:Hall, James A.
Publisher:Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis...
Accounting
ISBN:9780134475585
Author:Srikant M. Datar, Madhav V. Rajan
Publisher:PEARSON
Intermediate Accounting
Accounting
ISBN:9781259722660
Author:J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:McGraw-Hill Education
Financial and Managerial Accounting
Accounting
ISBN:9781259726705
Author:John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:McGraw-Hill Education
Pricing Decisions; Author: Rutgers Accounting Web;https://www.youtube.com/watch?v=rQHbIVEAOvM;License: Standard Youtube License