6.

Algeria Transport Company has average invested capital of $880,000 and a target return on investment of 13%. The total cost per unit is $20 based on a volume level of 33,000 units. Albany's markup percentage on total cost is:

Multiple Choice

9.750%.

17.3%.

62.0%.

75.0%.

None of these.

9.

Quantum Enterprises currently sells a piece of luggage for $230. An aggressive competitor has announced plans for a similar product that will be sold for $185. Quantum's marketing department believes that if the price is dropped to meet competition, unit sales will increase by 10%. The current cost to manufacture and distribute the luggage is $145, and Quantum has a profit goal of 35% of sales. If Quantum meets competitive selling prices, what must happen to the company's manufacturing and distribution cost?

Multiple Choice

Nothing, because the costs are within defined ranges and can actually increase by $4.50.

Nothing, because the costs are within defined ranges and can actually increase by $19.45.

Costs must decrease by $24.75.

Costs must decrease by $50.75.

None of these.

10.

Madison produces bicycles in a highly competitive market. During the past year, the company has added a 40% markup on the $410 manufacturing cost for one of its most popular models. A new competitor manufactures a similar model, has established a $460 selling price, and is seriously eroding Madison's market share. Management now desires to use a target-costing approach to remain competitive and is willing to accept a 30% return on sales. If target costing is used, which of the following choices correctly denotes (1) the price that Madison will charge and (2) company's target cost?

	Selling Price	Target Cost
A.	$460	$322
B.	$460	$410
C.	$574	$322
D.	$574	$410
E.	Some other combination of selling price and target cost.

Multiple Choice

Choice A

Choice B

Choice C

Choice D

Choice E

11.

Paul's Auto Repair uses time and material pricing. The body shop, which anticipates 10,000 direct labor hours of activity, has the following data:

Annual overhead costs:
Material handling and storage	$ 28,000
Other overhead costs	88,000
Annual cost of materials used	194,000
Labor rate per hour, including fringe benefits	21.25
Hourly charge to achieve profit margin	14.25

The time charge per hour is (Do not round your intermediate calculations.):

Multiple Choice

$24.05.

$32.85.

$35.50.

$44.30.

None of these.