Managerial Accounting: Tools for Business Decision Making
7th Edition
ISBN: 9781118334331
Author: Jerry J. Weygandt, Paul D. Kimmel, Donald E. Kieso
Publisher: WILEY
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Textbook Question
Chapter 8, Problem 8.8AP
Anderson Windows Inc. is in the process of setting a target price on its newly designed tinted window. Cost data relating to the window at a budgeted volume of 4,000 units are as follows.
| Per Unit | Total | |
| Direct materials | $100 | |
| Direct labor | $ 70 | |
| Variable manufacturing |
$ 20 | |
| Fixed manufacturing overhead | $120,000 | |
| Variable selling and administrative expenses | $ 10 | |
| Fixed selling and administrative expenses | $102,000 |
Anderson Windows uses cost-plus pricing methods that are designed to provide the company with a 25%
Instructions
(a) Compute the markup percentage under absorption-cost pricing that will allow Anderson Windows to realize its desired ROI.
(b) Compute the target price of the window under absorption-cost pricing, and show proof that the desired ROI is realized.
(c) Compute the markup percentage under variable-cost pricing that will allow Anderson Windows to realize its desired ROI. (Round to three decimal places.)
(d) Compute the target price of the window under variable-cost pricing, and show proof that the desired ROI is realized.
(e) 
Since both absorption-cost pricing and variable-cost pricing produce the same target price and provide the same desired ROI, why do both methods exist? Isn’t one method clearly superior to the other?
Compute various amounts using absorption-cost pricing and variable pricing.
(LO 5), AP
(a) 45%
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Gonzales Corp. needs to set a target price for its newly designed product EverReady. The following data relate to this product.
Per Unit Total
Direct Material $20
Direct Labor $40
Variable manufacturing Overhead $10
Fixed manufacturing overhead $1,200,000
Variable selling and administrative $5
Fixed selling and administrative $1,120,000
The costs shown above are based on a budgeted volume of 80,000 units produced and sold each year. Gonzales uses cost-plus pricing methods to set its target selling price. Because some managers prefer absorption-cost pricing and others prefer variable-cost pricing, the accounting department provides information under both approaches using a markup of 50% on absorption cost and a markup of 70% on variable cost.…
Gonzales Corp. needs to set a target price for its newly designed product EverReady. The following data relate to this product.
Per Unit Total
Direct Material $20
Direct Labor $40
Variable manufacturing Overhead $10
Fixed manufacturing overhead $1,200,000
Variable selling and administrative $5
Fixed selling and administrative $1,120,000
The costs shown above are based on a budgeted volume of 80,000 units produced and sold each year. Gonzales uses cost-plus pricing methods to set its target selling price. Because some managers prefer absorption-cost pricing and others prefer variable-cost pricing, the accounting department provides information under both approaches using a markup of 50% on absorption cost and a markup of 70% on variable cost.…
Cullumber Corporation is in the process of setting a selling price for a recently designed product. The following data relate to this
product at a budgeted volume of 60,000 units.
Direct materials
Direct labor
Variable manufacturing overhead
Fixed manufacturing overhead
Variable selling and administrative expenses
Fixed selling and administrative expenses
(a1)
Total unit variable cost $
Total unit fixed cost
Total unit cost
Per Unit
$
$30
$
40
Cullumber uses cost-plus pricing to set its target selling price and has a markup on total unit cost of 30%.
10
6
Compute total unit variable cost, total unit fixed cost, and total unit cost for the new product.
Total
$2,220,000
1,920,000
Chapter 8 Solutions
Managerial Accounting: Tools for Business Decision Making
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Ch. 8 - What is a transfer price? Why is determining a...Ch. 8 - When setting a transfer price, what objective(s)...Ch. 8 - What are the three approaches for determining...Ch. 8 - Prob. 14QCh. 8 - What is the general formula for determining the...Ch. 8 - When determining the minimum transfer price, what...Ch. 8 - In what circumstances will a negotiated transfer...Ch. 8 - What costs are excluded from the cost base when...Ch. 8 - Prob. 19QCh. 8 - Prob. 20QCh. 8 - Onega Company manufactures computer hard drives....Ch. 8 - Mussatto Corporation produces snowboards. The...Ch. 8 - Jaymes Corporation produces high-performance...Ch. 8 - Momies Corporation produces microwave ovens. The...Ch. 8 - During the current year, Chudrick Corporation...Ch. 8 - Rooney Small Engine Repair charges 42 per hour of...Ch. 8 - Prob. 8.7BECh. 8 - Use the data from BE8-7 but assume that the...Ch. 8 - Use the data from BE8-7 but assume that the units...Ch. 8 - Using the data in BE8-4, compute the markup...Ch. 8 - Using the data in BH8-4, compute the markup...Ch. 8 - Maize Water is considering introducing a water...Ch. 8 - Gundy Corporation produces area rugs. The...Ch. 8 - Presented below are data relating to labor for...Ch. 8 - The fastener division of Southern Fasteners...Ch. 8 - Mesa Cheese Company has developed a new cheese...Ch. 8 - Eckert Company is involved in producing and...Ch. 8 - Leno Company makes swimsuits and sells these suits...Ch. 8 - Kaspar Corporation makes a commercial-grade...Ch. 8 - Schopp Corporation makes a mechanical stuffed...Ch. 8 - Almas Recording Studio rents studio time to...Ch. 8 - Gibbs Corporation produces industrial robots for...Ch. 8 - Second Chance Welding rebuilds spot welders for...Ch. 8 - Rey Custom Electronics (RCE) sells and installs...Ch. 8 - Wassons Classic Cars restores classic automobiles...Ch. 8 - Chen Companys Small Motor Division manufactures a...Ch. 8 - The Cycle Division of Ayala Company has the...Ch. 8 - Prob. 8.13ECh. 8 - The Bathtub Division of Kirk Plumbing Corporation...Ch. 8 - The Appraisal Department of Jean Bank performs...Ch. 8 - Crede Inc. has two divisions. Division A makes and...Ch. 8 - Prob. 8.17ECh. 8 - Prob. 8.18ECh. 8 - Rap Corporation produces outdoor portable...Ch. 8 - Information for Gibbs Corporation is given in...Ch. 8 - National Corporation needs to set a target price...Ch. 8 - Prob. 8.2APCh. 8 - Suttons Electronic Repair Shop has budgeted the...Ch. 8 - Word Wizard is a publishing company with a number...Ch. 8 - Prob. 8.5APCh. 8 - Comm Devices (CD) is a division of Worldwide...Ch. 8 - Prob. 8.7APCh. 8 - Anderson Windows Inc. is in the process of setting...Ch. 8 - CURRENT DESIGNS As a service to its customers,...Ch. 8 - Prob. 8.1BYPCh. 8 - Construction on the Bonita Full-Service Car Wash...Ch. 8 - Real-World Focus Merck Co., Inc. is a global,...Ch. 8 - Prob. 8.5BYPCh. 8 - Prob. 8.6BYPCh. 8 - The January 2011 issue of Strategic Finance...
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