MANAGERIAL ACCOUNTING FOR MANAGERS CONNE
6th Edition
ISBN: 9781264445325
Author: Noreen
Publisher: MCG
expand_more
expand_more
format_list_bulleted
Question
Chapter 6A, Problem 6A.12P
1.
To determine
Introduction: The incremental profit earned on sales of each unit as a result of all associated variable cost being deducted from the price of the product is termed as the contribution margin.
To calculate: The unit product cost for remodeled product.
2.
To determine
Introduction: The incremental profit earned on sales of each unit as a result of all associated variable cost being deducted from the price of the product is termed as the contribution margin.
To calculate: The markup percentage on absorption cost for the remodeled
3.
To determine
Introduction: The incremental profit earned on sales of each unit as a result of all associated variable cost being deducted from the price of the product is termed as the contribution margin.
The Selling price company should establish mark up percentage on absorption cost.
4.
To determine
Introduction: The incremental profit earned on sales of each unit as a result of all associated variable cost being deducted from the price of the product is termed as the contribution margin.
The
5.
To determine
Introduction: The incremental profit earned on sales of each unit as a result of all associated variable cost being deducted from the price of the product is termed as the contribution margin.
The revised selling price at lower sales level.
6.
To determine
Introduction: The incremental profit earned on sales of each unit as a result of all associated variable cost being deducted from the price of the product is termed as the contribution margin.
The revised selling price and profit at lower sales level
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
Absorption Costing Approach to Cost-Plus Pricing; Customer Latitude and Pricing
Messina Company wants to use absorption cost-plus pricing to establish the selling price for a new product. The company plans to invest $650,000 in operating assets that provide the capacity to make 30,000 units. Its required return on investment (ROI) in its operating assets is 20%. Messina’s Accounting Department set a goal of producing and selling 20,000 units during the new product’s first year of availability. It also provided the following cost estimates for the new product:
Required:
1. If the company plans to produce and sell 20,000 units, what is the absorption unit product cost for its new product?
2. At a planned sales volume of 20,000 units, what is the markup percentage on absorption cost for the new product?
3. Using absorption cost-plus pricing and assuming a planned sales volume of 20,000 units, what selling price would the company establish for its new product?
4. Using an absorption…
Absorption Costing Approach to Cost-Plus Pricing
Aldean Company wants to use absorption cost-plus pricing to set the selling price on a new product. The company plans to invest $200,000 in operating assets to produce and sell 16,000 units. Its required return on investment (ROI) in its operating assets is 18%. The accounting department has provided cost estimates for the new product as shown below:
Required:
1. What is the unit product cost for the new product?
2. What is the markup percentage on absorption cost for the new product?
3. What selling price would the company establish for its new product using a markup percentage on absorption cost? (Round your answer to the nearest penny.)
K A product costs $500 to manufacture and $30 to market and $10 to distribute (ship to customers) R&D costs are allocated at $20 per unit. Based on a targeted rate of return, manager uses a mark-up of 10%. What is the markup component based on a Cost-Plus pricing approach?
Chapter 6A Solutions
MANAGERIAL ACCOUNTING FOR MANAGERS CONNE
Knowledge Booster
Similar questions
- Sales Needed to Earn Target Income Chillmax Company plans to sell 3,500 pairs of shoes at 60 each in the coming year. Variable cost is 35% of the sales price; contribution margin is 65% of the sales price. Total fixed cost equals 78,000 (includes fixed factory overhead and fixed selling and administrative expense). Required: 1. Calculate the sales revenue that Chillmax must make to earn operating income of 81,900 by using the point in sales equation. 2. Check your answer by preparing a contribution margin income statement based on the sales dollars calculated in Requirement 1.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 15,000 Unit product cost $ 30 Estimated annual selling and administrative expenses $ 68,400 Estimated investment required by the company $ 780,000 Desired return on investment (ROI) 12 % What is the markup percentage on absorption cost required to achieve the desired ROI? Multiple Choice 41% 46% 36% 31%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 15,000 Unit product cost $ 35.50 Estimated annual selling and administrative expenses $ 63,900 Estimated investment required by the company $ 780,000 Desired return on investment (ROI) 12 % The selling price that the company would establish using a markup percentage on absorption cost is closest to: Multiple Choice $46.00. $41.80. $48.00. $50.00.arrow_forward
- Assume 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) 15,000 $ 33.00 $ 63,900 $780,000 12% The selling price that the company would establish using a markup percentage on absorption cost is closest to:arrow_forwardTarget Costing Basic Motor Corporation uses target costing. Assume that Basic marketing personnel estimate that the competitive selling price for the QuikCar in the upcoming model year will need to be $23,400. Assume further that the QuikCar's total unit cost for the upcoming model year is estimated to be $19,900 and that Basic requires a 20% profit margin on selling price (which is equivalent to a 25% markup on total cost). a. What price will Basic establish for the QuikCar for the upcoming model year?$ b. Since the estimated manufacturing cost is less than the target cost, Basic must reduce its total costs to maintain competitive pricing within its profit objectives.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_forward
- Target Costing Basic Motor Corporation uses target costing. Assume that Basic marketing personnel estimate that the competitive selling price for the QuikCar in the upcoming model year will need to be $23,900. Assume further that the QuikCar's total unit cost for the upcoming model year is estimated to be $19,400 and that Basic requires a 20% profit margin on selling price (which is equivalent to a 25% markup on total cost). What price will Basic establish for the QuikCar for the upcoming model year? $fill in the blankarrow_forwardPaty Ltd operating business of shipping it is contemplating two cost structures for its operations. A. The plan has high variable cost pu shipped with lower annual fixed costsB. The plan has lower variable cost with higher fixed cost.Details of Cost:Plan A:Per shipment revenue=100Variable cost per shipment delivered=85Contribution=15Annual fixed cost=1,200,000Plan B:Per shipment revenue=100Variable cost per shipment delivered=60Contribution=40Annual fixed cost=4,500,000Required:1.BEP (In volumes) for both the plans2.Under plan A to produce an operating income of 30,000, how many shipments to be made.3. Shipments to be made under plan A to produce an operating margin which is equal to 9% of sales revenue in total.arrow_forwardMajesty 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. 4arrow_forward
- 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 $ 1,500 Annual demand 86,000 units Life cycle 7 years Target profit 26 % return on sales Required: 1. Compute the target cost of this product. 2. Compute the target cost if Majesty wants a 36 percent return on sales. 3. Compute the target cost if Majesty wants a 7 percent return on sales.arrow_forwardCompany E has two divisions, Division A and Division B. Division A is currently buying Component X from an external seller for $14. Division B produces Component X and has excess capacity. Using the following data, what would the transfer price per unit if Division A purchased Component X from Division B at the cost plus assuming 22% transfer price? • Variable cost per unit $7.27 Fixed cost per unit 1.93 • Division B sales price of Component X 14.50arrow_forwardAbsorption Costing Approach to Cost-Plus Pricing Currington Company wants to use absorption cost-plus pricing to set the selling price on a newly remodeled product. The company plans to invest $150,000 in operating assets to produce and sell 12,000 units. Its required return on investment (ROI) in its operating assets is 16%. The accounting department has provided cost estimates for the new product as follows: Required: 1. What is the unit product cost for the remodeled product? 2. What is the markup percentage on absorption cost for the remodeled product? 3. What selling price would the company establish for its remolded product using a markup percentage on absorption cost? 4. Suppose the company actually sold only 10,000 units (instead of its planned sales volume of 12,000 units) at the selling price that you derived in requirement 3. What ROI did the company actually earn at this lower sales volume? 5. Assume that the company wants to raise the price of its newly remodeled product…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
Managerial Accounting: The Cornerstone of Busines...AccountingISBN:9781337115773Author:Maryanne M. Mowen, Don R. Hansen, Dan L. HeitgerPublisher:Cengage Learning
Managerial Accounting
Accounting
ISBN:9781337912020
Author:Carl Warren, Ph.d. Cma William B. Tayler
Publisher:South-Western College Pub
Managerial Accounting: The Cornerstone of Busines...
Accounting
ISBN:9781337115773
Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
Publisher:Cengage Learning