Managerial Accounting: Tools for Business Decision Making
7th Edition
ISBN: 9781118334331
Author: Jerry J. Weygandt, Paul D. Kimmel, Donald E. Kieso
Publisher: WILEY
expand_more
expand_more
format_list_bulleted
Concept explainers
Videos
Textbook Question
Chapter 8, Problem 8CD
CURRENT DESIGNS
As a service to its customers, Current Designs repairs damaged kayaks. This is especially valuable to customers that have made a significant investment in the composite kayaks. To price the repair jobs, Current Designs uses time-and-material pricing with a desired profit margin of $20 per labor hour and a 50% materials loading charge.
Recently. Bill Johnson. Vice President of Sales and Marketing, received a phone call from a dealer in Brainerd. Minnesota. The dealer has a customer who recently damaged his composite kayak and would like an estimate of the cost to repair it. After the dealer emailed pictures of the damage. Bill reviewed the pictures with the repair technician and determined that the total materials charges for the repair would be $100. Bill estimates that the job will take 3 labor hours to complete. Following is the budgeted cost data for Current Designs:
| Repair technician wages | $30,000 |
| $10,000 | |
| $10,000 |
Current Designs has allocated 2,000 hours of repair time for the upcoming year. The customer has agreed to transport the kayak to the Winona production facility for the repairs.
Instructions
Determine the price that Current Designs would charge to complete the repairs for the customer.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
Alter's Home Center (AHC) sells renovation and remodeling products to both contractors and individual home owners. One of the services AHC offers is delivery of the purchased products to the customer's work site. Because not all customers take advantage of the delivery service option, ACH adds 10 percent to the cost of the products purchased to cover the delivery cost. A business intern spent the summer at ACH. The intern's assignment was to analyze the delivery service and recommend a better way to charge customers for using it. The intern, who had studied activity-based costing, identified the following activities and the data related to them:
Activity
Cost Driver
Annual Cost
Annual Driver Volume
Picking order
Number of items
$ 353,875
372,500
items
Delivering order
Number of orders
1,190,000
35,000
orders
Handling complaints
Number of complaints
40,500
150
complaints
Total delivery cost
Â
$ 1,584,375
Â
Â
The intern selected two customers, who were frequent customers,…
Alter's Home Center (AHC) sells renovation and remodeling products to both contractors and individual home owners. One of the
services AHC offers is delivery of the purchased products to the customer's work site. Because not all customers take advantage of
the delivery service option, ACH adds 10 percent to the cost of the products purchased to cover the delivery cost. A business intern
spent the summer at ACH. The intern's assignment was to analyze the delivery service and recommend a better way to charge
customers for using it. The intern, who had studied activity-based costing, identified the following activities and the data related to
them:
Activity
Picking order
Delivering order
Handling complaints
Total delivery cost
Cost Driver
Number of items
Number of orders
Number of complaints
Annual Cost
$ 353,875
1,190,000
40,500
$ 1,584,375
Total order value (before delivery charge)
Number of orders
Total number of items
Number of delivery complaints
The intern selected two customers,…
Alter's Home Center (AHC) sells renovation and remodeling products to both contractors and individual home owners. One of the services AHC offers is delivery of the purchased products to the customer's work site. Because not all customers take advantage of the delivery service option, ACH adds 10 percent to the cost of the products purchased to cover the delivery cost. A business intern spent the summer at ACH. The intern's assignment was to analyze the delivery service and recommend a better way to charge customers for using it. The intern, who had studied activity-based costing, identified the following activities and the data related to them:
Activity
Cost Driver
Annual Cost
Annual Driver Volume
Picking order
Number of items
$ 330,750
367,500
items
Delivering order
Number of orders
942,500
32,500
orders
Handling complaints
Number of complaints
32,500
125
complaints
Total delivery cost
Â
$ 1,305,750
Â
Â
The intern selected two customers, who were frequent customers,…
Chapter 8 Solutions
Managerial Accounting: Tools for Business Decision Making
Ch. 8 - What are the two types of pricing environments for...Ch. 8 - Prob. 2QCh. 8 - Prob. 3QCh. 8 - Benz Corporation produces a filter that has a per...Ch. 8 - What is the basic formula for the markup...Ch. 8 - Prob. 6QCh. 8 - Stanley Corporation manufactures an electronic...Ch. 8 - Sheen Co. manufactures a standard cabinet for a...Ch. 8 - Prob. 9QCh. 8 - Prob. 10Q
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...
Additional Business Textbook Solutions
Find more solutions based on key concepts
Revenue recognition principle Revenue recognition principle states that every business organization should reco...
Horngren's Financial & Managerial Accounting, The Financial Chapters (Book & Access Card)
Compute Cost of Goods Manufactured and Cost of Goods Sold (Learning Objective 5) Compute the Cost of Goods Manu...
Managerial Accounting (5th Edition)
Under IFRS, how do firms account for convertible debt?
Intermediate Accounting
Account for mortgages. (LO 3). Nunez Company has arranged to borrow $25,000 for five years at an interest rate ...
Financial Accounting
Asset Retirement Obligation. On January 1, Evergreen Utilities Company acquired a power plant at a total cost o...
Intermediate Accounting (2nd Edition)
If a garden center is considering the purchase of a new tractor with an initial investment cost of $120,000, an...
Principles of Accounting Volume 2
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
- Alter's Home Center (AHC) sells renovation and remodeling products to both contractors and individual home owners. One of the services AHC offers is delivery of the purchased products to the customer's work site. Because not all customers take advantage of the delivery service option, ACH adds 10 percent to the cost of the products purchased to cover the delivery cost. A business intern spent the summer at ACH. The intern's assignment was to analyze the delivery service and recommend a better way to charge customers for using it. The intern, who had studied activity-based costing, identified the following activities and the data related to them: Activity Picking order Delivering order Handling complaints Total delivery cost Cost Driver Number of items Number of orders Number of complaints Annual Cost $ 286,000 522,500 32,400 $ 840,900 Total order value (before delivery charge) Number of orders The intern selected two customers, who were frequent customers, to use as an illustration of…arrow_forwardAlter's Home Center (AHC) sells renovation and remodeling products to both contractors and individual home owners. One of the services AHC offers is delivery of the purchased products to the customer's work site. Because not all customers take advantage of the delivery service option, ACH adds 10 percent to the cost of the products purchased to cover the delivery cost. A business intern spent the summer at ACH. The intern's assignment was to analyze the delivery service and recommend a better way to charge customers for using it. The intern, who had studied activity-based costing, identified the following activities and the data related to them: Activity Picking order Delivering order Handling complaints Total delivery cost Cost Driver Number of items Number of orders Number of complaints Annual Cost $ 308,125 720,000 40,000 Annual Driver Volume 362,500 items 30,000 orders 160 complaints $ 1,068,125 The intern selected two customers, who were frequent customers, to use as an…arrow_forwardWood Creations designs, manufactures, and sells modern wood sculptures. Sally Jensen is an artist for the company. Jensen has spent much of the past month working on the design of an intricate abstract piece. Jim Smoot, product development manager, likes the design. However, he wants to make sure that the sculpture can be priced competitively. Alexis Nampa, Wood's cost accountant, presents Smoot with the following cost data for the expected production of 75 sculptures: $ 8,000 30,000 37,000 33,000 25,000 15,000 Design cost Direct materials Direct manufacturing labor Variable manufacturing overhead Fixed manufacturing overhead Marketing Required: 1. Smoot thinks that Wood Creations can successfully market each piece for $2,400. The company's target operating income is 20% of revenue. a.) Wood Creations has a total capital investment of $240,000. Compute the target percentage of return on investment. b.) Calculate the markup percentage on full cost based on the current cost data. c.)…arrow_forward
- Sylvan Creations designs, manufactures, and sells modern wood sculptures. Sandra Johnson is an artist for the company. Johnson has spent much of the past month working on the design of an intricate abstract piece. Jim Chase, product development manager, likes the design. However, he wants to make sure that the sculpture can be priced competitively. Ellen Cooper, Sylvan’s cost accountant, presents Chase with the following cost data for the expected production of 75 sculptures: Design cost $10,000 Direct materials 80,000 Direct manufacturing labor 27,500 Variable manufacturing overhead 10,000 Fixed manufacturing overhead 42,500 Fixed marketing costs 17,500 Q.What challenges might managers at Sylvan Creations encounter in achieving the target cost and how might they overcome these challenges?arrow_forwardSylvan Creations designs, manufactures, and sells modern wood sculptures. Sandra Johnson is an artist for the company. Johnson has spent much of the past month working on the design of an intricate abstract piece. Jim Chase, product development manager, likes the design. However, he wants to make sure that the sculpture can be priced competitively. Ellen Cooper, Sylvan’s cost accountant, presents Chase with the following cost data for the expected production of 75 sculptures: Design cost $10,000 Direct materials 80,000 Direct manufacturing labor 27,500 Variable manufacturing overhead 10,000 Fixed manufacturing overhead 42,500 Fixed marketing costs 17,500 Q.Chase believes that competition will require Sylvan to reduce the price of the sculpture to $2,800. Rather than using the highest-grade wood available, Sylvan could use standard grade wood and lower the cost of direct materials by 25%. This redesign will require an additional $1,500 of design cost. Will this design change allow…arrow_forwardSylvan Creations designs, manufactures, and sells modern wood sculptures. Sandra Johnson is an artist for the company. Johnson has spent much of the past month working on the design of an intricate abstract piece. Jim Chase, product development manager, likes the design. However, he wants to make sure that the sculpture can be priced competitively. Ellen Cooper, Sylvan’s cost accountant, presents Chase with the following cost data for the expected production of 75 sculptures: Design cost $10,000 Direct materials 80,000 Direct manufacturing labor 27,500 Variable manufacturing overhead 10,000 Fixed manufacturing overhead 42,500 Fixed marketing costs 17,500 Q. Chase thinks that Sylvan Creations can successfully market each piece for $3,000. To earn the required return on capital, the company’s target operating income per unit is 20% of target price. Calculate the target full cost per unit of producing the 75 sculptures. Does the cost estimate Cooper developed meet Sylvan’s requirements?…arrow_forward
- Assume that HASF  furniture Inc., as described, currently purchases the chair cushions for its lawn set from an outside vendor for $30 per set. Modern Furniture’s chief operations officer wants an analysis of the comparative costs of manufacturing these cushions to determine whether bringing the manufacturing in-house would save the firm money. Additional information shows that if Modern furniture’s were to manufacture the cushions, the materials cost would be $16 and the labor cost would be $10 per set and that it would have to purchase cutting and sewing equipment, which would add $25,000 to annual fixed costs. Required  Computation for 10,000 units What amount should have been inccrued if company produce 10,000 units What amount should have been inccrued if company purhcase 10,000 units from outside  What amount company save if company make 10,000 cushionsarrow_forwardAssume that HASF  furniture Inc., as described, currently purchases the chair cushions for its lawn set from an outside vendor for $30 per set. Modern Furniture’s chief operations officer wants an analysis of the comparative costs of manufacturing these cushions to determine whether bringing the manufacturing in-house would save the firm money. Additional information shows that if Modern furniture’s were to manufacture the cushions, the materials cost would be $16 and the labor cost would be $10 per set and that it would have to purchase cutting and sewing equipment, which would add $25,000 to annual fixed costs.  NOTE: No need to enter comma between numbers  Required  Computation for 10,000 units  What amount should have been inccrued if company produce 10,000 units What amount should have been inccrued if company purhcase 10,000 units from outside  What amount company save if company make 10,000 cushionsarrow_forwardLeno Company makes swimsuits and sells these suits directly to retailers. Although Leno has a variety of suits, it does not make the All- Body suit used by highly skilled swimmers. The market research department believes that a strong market exists for this type of suit. The department indicates that the All-Body suit would sell for approximately $100. Given its experience, Leno believes the All-Body suit would have the following manufacturing costs. Direct materials Direct labor Manufacturing overhead Total costs (a1) Selling price $ eTextbook and Media $29 Save for Later 29 Assume that Leno uses cost-plus pricing, setting the selling price 26% above its costs. What would be the price charged for the All- Body swimsuit? 42 $100 Assistance Used Attempts: 0 of 3 used Submit Answerarrow_forward
- In keeping with the increasingly popular merchandising theme of customization an entrepreneurial engineer started a business making customized bobblehead dolls. He entered into a contract with Binkely Toys, Inc. the maker of the dolls to purchase bobbleheads in lots of 250 for $2500. If the engineers initial investment was $59,000 and his profit was $37.000 in year 1 and $47.000 in year 2. his rate of return was closest to Select one: a 18% b. 21% c 20 d. 32%arrow_forwardThe Ferndale Furniture Company produces custom furniture for walk-in customers. Products include coffee tables, shelving units, mirrors, and hutches and can be constructed with either pine or oak. Custom kitchen cabinetry and installation will also be considered during the slower winter season. The company is owned and operated by Ken McMann, who has one full-time employee working for him. Ken has worked in this industry for many years and has just started the company. Currently, for customer pricing inquiries, Ken provides a quote based on his best estimate and years of experience in the business and applies a 40% markup on cost. Ken’s son Owen has returned home for the summer after completing his first semester of an accounting program. Owen described to Ken the benefits of a job-order costing system to track costs and as a basis for quoting sales prices to prospective customers. Ken believes he could use this cost accounting system in his new business and sets aside a few hours to…arrow_forwardCoram Audio makes wireless headphones. Each pair of headphones comes with a travel case. Since its founding. Coram has manufactured its own travel cases. Recently, Holmur Travel Gear (HTG), a local outfitter that manufactures and sells backpacks, tent cases, and so on, contacted Coram and proposed that they produce the headphone travel cases. Based on management experience, Coram's cost per travel case is as follows (based on annual production of 42,800 units). Direct materials Direct labor Variable overhead Fixed overhead Total $ 10.00 21.20 6.40 4.70 $ 42.30 HTG has offered to sell the case to Coram for $39 each. The total order would amount to 42,800 travel cases per year. Coram's management decides that they will make the switch to HTG cases if Coram can save at least $13,400 per year. Accepting the offer would eliminate annual fixed overhead of $81,320. Required: a. Prepare a schedule that shows the total differential costs. b. Should Coram continue to make the travel cases or buy…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
What is variance analysis?; Author: Corporate finance institute;https://www.youtube.com/watch?v=SMTa1lZu7Qw;License: Standard YouTube License, CC-BY