A.

For many years, Leno Corporation has used a straightforward costplus pricing system, marking its goods up approximately 25 percent of total cost. The company has been profitable; however, it has recently lost considerable business to foreign competitors that have become very aggressive in the marketplace. These firms appear to be using target costing. An example of Leno's problem is typied by item no. 8976. which has the following unitcost characteristics: Direct material $139 Direct labor 215 Manufacturing overhead 145 Selling and administrative expenses 89 The going market price for an identical product of comparable quality is $580, which is significantly below what Leno is charging. 3. If Leno used target costing for item no. 8976, what must happen to costs if the company desires to meet the market price and maintain its current rate of prot on safes? By how much? ::i \f5. Suppose that by previous costcutting drives, costs had already been \"pared to the bone" on item no. 8976. What might Leno be forced to do with its markup on cost to remain competitive? By how much? [Do not round intermediate calculations. Round your percentage answer to 2 decimal places (i.e.. .1234 should be entered as 12.34\" % 6. In many industries, prices are the result ofan interaction between market forces and costs. True or False Southern Tier Heating, Inc.. installs heating systems in new homes built in the southern tier counties of New York state. Jobs are priced using the time and materials method. The president of Southern Tier Heating, B. T. Ewing. is pricing ajob involving the heating systems for six houses to be built by a local developer. He has made the following estimates. Material cost $89,663 Labor hours 469 The following predictions pertain to the company's operations for the next year. Labor rateJ including fringe benefits $ 28.Bper hour Annual labor hours 16JBBBhours Annual overhead costs: Material handling and storage $ SSJSBB Other overhead costs $155JBBB Annual cost 0t materials used $34ZJSBB Required: Southern Tier Heating adds a markup of $8.00 per hour on its time charges, but there is no markup on material costs. 1. Calculate the company's time charges and the material charges percentage. (Round I'Time charges" answer to 2 decimal places.) 2. Compute the price for the job. (Do not round intermediate calculations.) 3. What would be the price of thejob if Southern Tier Heating also added a markup of15 percent on all material charges (including material handling and storage costs)? (Do not round intermediate calculations.) per labor hour . Time charges Material charges 2. Price oliob 3, Price oliob