1. Schrader Surfboard Corp. has designed a new surfboard. Because of its unique design, the company thinks it can sell all the boards it can produce. On this basis, the following incomplete budgeted income statement for the first year of activity is available:

Additional information on the new surfboard:

-An additional investment of $1,150,000 will be necessary to carry inventories and accounts receivable and to purchase new equipment. The companys required rate of return is 18% on all investments.

-A partially completed standard cost card for the new surfboard:

-The company will employ 20 workers to make the new product. Assume each will work a 40-hour week, 50 weeks per year.

-Other information regarding production and costs:

-Overhead costs are applied based on direct-labor hours.

1a. How many units will the company make?

1b. Complete the standard cost card.

Assume the company uses absorption costing to compute its cost-plus pricing.

1c. Compute the markup the company has to achieve the 18% return on investment.

1d. Using the markup you computed, prepare a price quote sheet for one surfboard (shows cost plus price)

1e. If the company sell all its new surfboards, finish the partial income statement, and compute the ROI for the year.

1f. Assuming that Direct Labor is a variable cost, how many units would the company have to sell at the price you computed in Question 1d to actually achieve the 18% ROI? How many units would have to be sold to just breakeven...

Sales (? Boards at ? per surfboard) Cost of goods sold (?boards at ? per board) Gross profit Selling and administrative expenses Net operating income $ ??? 1,600,000 ? 1,130,000 ?? Direct materials Direct Labor Manufacturing Overhead Total standard cost Standard Quantity or Hours 6 feet 2 hours ? hours Standard Price or Rate $4.50 per foot ? per hour ? per hour Standard Cost $27 ? ? $ ? per board Variable MOH cost per board Variable selling expense per board Fixed MOH (total) Fixed selling and administrative expense (total) Number of boards produced and sold per year $5 $10 $600,000 $? ? Sales (? Boards at ? per surfboard) Cost of goods sold (?boards at ? per board) Gross profit Selling and administrative expenses Net operating income $ ??? 1,600,000 ? 1,130,000 ?? Direct materials Direct Labor Manufacturing Overhead Total standard cost Standard Quantity or Hours 6 feet 2 hours ? hours Standard Price or Rate $4.50 per foot ? per hour ? per hour Standard Cost $27 ? ? $ ? per board Variable MOH cost per board Variable selling expense per board Fixed MOH (total) Fixed selling and administrative expense (total) Number of boards produced and sold per year $5 $10 $600,000 $