Horngren's Cost Accounting: A Managerial Emphasis (16th Edition)
16th Edition
ISBN: 9780134475585
Author: Srikant M. Datar, Madhav V. Rajan
Publisher: PEARSON
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Textbook Question
Chapter 13, Problem 13.26P
Cost-plus, target pricing, working backward. The new CEO of Rusty Manufacturing has asked for information about the operations of the firm from last year. The CEO is given the following information, but with some data missing:
| Total sales revenue | ? |
| Number of units produced and sold | 500,000 units |
| Selling price | ? |
| Operating income | $180,000 |
| Total investment in assets | $2,250,000 |
| Variable cost per unit | $4,00 |
| Fixed costs for the year | $2,500,000 |
- 1. Find (a) total sales revenue, (b) selling price, (c) rate of
return on investment , and (d) markup percentage on full cost for this product. Required - 2. The new CEO has a plan to reduce fixed costs by $225,000 and variable costs by $0.30 per unit while continuing to produce and sell 500,000 units. Using the same markup percentage as in requirement 1, calculate the new selling price.
- 3. Assume the CEO institutes the changes in requirement 2 including the new selling price. However, the reduction in variable cost has resulted in lower product quality resulting in 5% fewer units being sold compared with before the change. Calculate operating income (loss).
- 4. What concerns, if any, other than the quality problem described in requirement 3, do you see in implementing the CEO’s plan? Explain briefly.
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Cost-plus, target pricing, working backward. The new CEO of Rusty Manufacturing has asked for a variety of information about the operations of the firm from last year. The CEO is given the following information, but with some data missing:
Find (a) total sales revenue, (b) selling price, (c) rate of return on investment, and (d) markup percentage on full cost for this product.
The new CEO has a plan to reduce fixed costs by $225,000 and variable costs by $0.30 per unit while continuing to produce and sell 500,000 units. Using the same markup percentage as in requirement 1, calculate the new selling price.
Assume the CEO institutes the changes in requirement 2 including the new selling price. However, the reduction in variable cost has resulted in lower product quality resulting in 5% fewer units being sold compared with before the change. Calculate operating income (loss).
What concerns, if any, other than the quality problem described in requirement 3, do you see in implementing the…
A company is making plans for next year, using cost-volume-profit analysis as its planning tool. Next year's sales data about its product are as follows
Selling price P60
Variable manufacturing costs per unit 22.50
Variable selling and administrative costs 4.5
Fixed operating costs (60% is manufacturing costs) P159,500
Income tax rate 30%
How much should sales be next year if the company wants to earn profit after tax of P23,100, the same amount that it earned last year?
Required information
[The following information applies to the questions displayed below.]
Data for Hermann Corporation are shown below:
Percent of
Per Unit
Sales
Selling price
Variable expenses
$ 135
100%
81
60
Contribution margin
$ 54
40%
Fixed expenses are $87,00h per month and the company is selling 2,900 units per month.
2-a. Refer to the original data. How much will net operating income increase (decrease) per month if the company uses higher-quality
components that increase the variable expense by $5 per unit and increase unit sales by 20%.
2-b. Should the higher-quality components be used?
Complete this question by entering your answers in the tabs below.
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Chapter 13 Solutions
Horngren's Cost Accounting: A Managerial Emphasis (16th Edition)
Ch. 13 - What are the three major influences on pricing...Ch. 13 - Relevant costs for pricing decisions are full...Ch. 13 - Describe four purposes of cost allocation.Ch. 13 - How is activity-based costing useful for pricing...Ch. 13 - Describe two alternative approaches to long-run...Ch. 13 - What is a target cost per unit?Ch. 13 - Describe value engineering and its role in target...Ch. 13 - Give two examples of a value-added cost and two...Ch. 13 - It is not important for a company to distinguish...Ch. 13 - Prob. 13.10Q
Ch. 13 - Describe three alternative cost-plus pricing...Ch. 13 - Give two examples in which the difference in the...Ch. 13 - What is life-cycle budgeting?Ch. 13 - What are three benefits of using a product...Ch. 13 - Prob. 13.15QCh. 13 - Which of the following statements regarding price...Ch. 13 - Value-added, non-value-added costs. The Magill...Ch. 13 - Target operating income, value-added costs,...Ch. 13 - Target prices, target costs, activity-based...Ch. 13 - Target costs, effect of product-design changes on...Ch. 13 - Target costs, effect of process-design changes on...Ch. 13 - Cost-plus target return on investment pricing....Ch. 13 - Cost-plus, target pricing, working backward....Ch. 13 - Life-cycle budgeting and costing. Arnold...Ch. 13 - Considerations other than cost in pricing...Ch. 13 - Cost-plus, target pricing, working backward. The...Ch. 13 - Value engineering, target pricing, and target...Ch. 13 - Target service costs, value engineering,...Ch. 13 - Cost-plus, target return on investment pricing....Ch. 13 - Cost-plus, time and materials, ethics. C S...Ch. 13 - Cost-plus and market-based pricing. Georgia Temps,...Ch. 13 - Cost-plus and market-based pricing. (CMA, adapted)...Ch. 13 - Life-cycle costing. Maximum Metal Recycling and...Ch. 13 - Airline pricing, considerations other than cost in...Ch. 13 - Prob. 13.35PCh. 13 - Ethics and pricing. Instyle Interior Designs has...Ch. 13 - Value engineering, target pricing, and locked-in...
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