Fundamentals of Cost Accounting
5th Edition
ISBN: 9781259565403
Author: William N. Lanen Professor, Shannon Anderson Associate Professor, Michael W Maher
Publisher: McGraw-Hill Education
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Chapter 9, Problem 29E
a.
To determine
Determine which products would be dropped on the basis of CFO’s new policy along with computations.
b.
To determine
Determine the estimated margin for desks in year 2.
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Regular Company produces audio equipment, specifically headphones and speakers. A new CEO has just been hired and announces
a new policy that if a product cannot earn a markup of at least 25 percent, it will be dropped. The markup is computed as product
gross profit divided by reported product cost.
Manufacturing overhead for year 1 totaled $1,056,000. Overhead is allocated to products based on direct materials cost. Data for year
1 show the following:
Sales revenue
Direct materials
Direct labor
Req A1
Required:
a-1. Calculate the markup for both headphones and speakers.
a-2. Based on the CFO's new policy, which of the two products should be dropped?
b. Regardless of your answer in requirement (a), the CFO decides at the beginning of year 2 to drop the speakers from the product
line. The company cost analyst estimates that overhead without the speaker line will be $680,000. The revenue and costs for
headphones are expected to be the same as last year. What is the estimated markup for…
Regular Company produces audio equipment, specifically headphones and speakers. A new CEO has just been hired and announces
a new policy that if a product cannot earn a markup of at least 25 percent, it will be dropped. The markup is computed as product
gross profit divided by reported product cost.
Manufacturing overhead for year 1 totaled $978,000. Overhead is allocated to products based on direct materials cost. Data for year 1
show the following:
Sales revenue
Direct materials
Direct labor
Req A1
Headphones
$ 2,202,130
Required:
a-1. Calculate the markup for both headphones and speakers.
a-2. Based on the CFO's new policy, which of the two products should be dropped?
b. Regardless of your answer in requirement (a), the CFO decides at the beginning of year 2 to drop the speakers from the product
line. The company cost analyst estimates that overhead without the speaker line will be $615,000. The revenue and costs for
headphones are expected to be the same as last year. What is the…
bhavesh
Chapter 9 Solutions
Fundamentals of Cost Accounting
Ch. 9 - Give examples of cost drivers commonly used to...Ch. 9 - What is the death spiral? How is it related to the...Ch. 9 - The product costs reported using either plantwide...Ch. 9 - Why do companies commonly use direct labor-hours...Ch. 9 - What are the costs of moving to an activity-based...Ch. 9 - What are the basic steps in computing costs using...Ch. 9 - Prob. 7RQCh. 9 - Prob. 8RQCh. 9 - What type of organization is most likely to...Ch. 9 - Prob. 10RQ
Ch. 9 - How does complexity lead to higher costs? Why is...Ch. 9 - Prob. 12RQCh. 9 - Prob. 13RQCh. 9 - Why are cost drivers based on direct labor widely...Ch. 9 - Prob. 15CADQCh. 9 - Activity-based costing could not be applied in a...Ch. 9 - Activity-based costing is the same as department...Ch. 9 - Prob. 18CADQCh. 9 - It is clear after reading this chapter that...Ch. 9 - Prob. 20CADQCh. 9 - Prob. 21CADQCh. 9 - Prob. 22CADQCh. 9 - Prob. 23CADQCh. 9 - Activity-based costing is just another inventory...Ch. 9 - Prob. 25CADQCh. 9 - Prob. 26CADQCh. 9 - Prob. 27CADQCh. 9 - One of the issues we identified with traditional...Ch. 9 - Prob. 29ECh. 9 - Reported Costs and Decisions Kima Company...Ch. 9 - Plantwide versus Department Allocation Munoz...Ch. 9 - Plantwide versus Department Allocation Main Street...Ch. 9 - Unitwide versus Department...Ch. 9 - Prob. 34ECh. 9 - Activity-Based Costing After reviewing the new...Ch. 9 - Activity-Based Costing in a Nonmanufacturing...Ch. 9 - Activity-Based versus Traditional Costing Maglie...Ch. 9 - Activity-Based Costing versus Traditional Costing...Ch. 9 - Activity-Based Costing in a Service Environment...Ch. 9 - Activity-Based versus Traditional Costing Isadores...Ch. 9 - Prob. 41ECh. 9 - Activity-Based Costing: Cost Flows through...Ch. 9 - Prob. 43ECh. 9 - Activity-Based Costing for an Administrative...Ch. 9 - Prob. 45ECh. 9 - Time-Driven Activity-Based Costing Kim...Ch. 9 - Time-Driven ABC for an Administrative Service The...Ch. 9 - Comparative Income Statements and Management...Ch. 9 - Comparative Income Statements and Management...Ch. 9 - Prob. 50PCh. 9 - Activity-Based Costing and Predetermined Overhead...Ch. 9 - Activity-Based Costing and Predetermined Overhead...Ch. 9 - Choosing an Activity-Based Costing System Pickle...Ch. 9 - Churchill Products is considering updating its...Ch. 9 - Utica Manufacturing (UM) was recently acquired by...Ch. 9 - Cain Components manufactures and distributes...Ch. 9 - Prob. 57PCh. 9 - Cawker Products has two manufacturing...Ch. 9 - MTI makes three types of lawn tractors: M3100,...Ch. 9 - Prob. 60PCh. 9 - Prob. 61P
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