calculating Price Using a Markup Percentage of Cost Lake McDonald Gift Shop has decided to price the games that it sells at cost plus 70%. The National Parks Memory Card Game costs $5.00 each, and another one, the Guess This Animal Track Game, costs $1.50 each. Required: 1. What price will Lake McDonald Gift Shop charge for each National Parks Memory Card Game? If required, round your answer to two decimal places 2. What price will Lake McDonald Gift Shop charge for each Guess This Animal Track Game? If required, round your answer to two decimal places Petoskey Company produces three products: Alanson, Boyne, and Conway. A segmented income statement with amounts given in thousands, follows: Alanson Boyne Conway Total Sales revenue $1.280 $185 $345 $1,810 Less: Variable expenses 1.115 45 276 1,436 Contribution margin $165 $140 $69 5374 Less direct fixed expenses: Depreciation 50 15 15 80 Salaries 95 85 120 300 520 $40 5-6 Segment margin 5(66) Direct fixed expenses consist of depreciation and plant supervisory salaries. All depreciation on the equipment is dedicated to the product lines. None of the equipment can be sold. Assume that each of the three products has a different supervisor whose position would remain if the associated product were dropped. Required: CONCEPTUAL CONNECTION: Estimate the impact on profit that would result from dropping Conway. Enter amount in full, rather than in thousands. For example, "15000" rather than 15 Decrease Zion Manufacturing had always made its components in-house. However, Bryce Component Works had recently offered to supply one component, K2, at a price of $25 each. Zion uses 12,500 units of Component K2 each year. The cost per unit of this component is as follows: $12.00 8.25 Direct materials Direct labor Variable overhead Fixed overhead 4.50 6.00 Total $30.75 Assume that 75% of Zion Manufacturing's fixed overhead for Component K2 would be eliminated if that component were no longer produced Required: 1. CONCEPTUAL CONNECTION: If Zion decides to purchase the component from Bryce, by how much will operating income increase or decrease? Increase 0.25 x Which alternative is better? Purchase the component from Bryce Smooth Move Company manufactures professional paperweights and has been approached by a new customer with an offer to purchase 15,000 units at a per-unit price of $10.00. The new customer is geographically separated from Smooth Move's other customers, and existing sales will not be affected. Smooth Move normally produces 87,000 units but plans to produce and sell only 65,000 in the coming year. The normal sales price is $13 per unit. Unit cost Information is as follows: Direct materials $3.10 Direct labor 2.50 Variable overhead Fixed overhead 1.15 1.80 Total $8.55 $8.55 If Smooth Move accepts the order, no fixed manufacturing activities will be affected because there is sufficient excess capacity. Required: 1. What are the alternatives for Smooth Move? Accept or reject the special order 2. CONCEPTUAL CONNECTION: Should Smooth Move accept the special order? Yes By how much will profit increase or decrease if the order is accepted? Increase
