Euclid Fashions, Inc. has designed a sport jacket that is about to be introduced on the market. A standard cost card has been prepared for the new jacket, as shown below: Standard quantity of Standard price Standard hours or rate unit cost Direct materials 2.0 metres 4.60 per metre 9.20 Direct labour 1.4 hours 10.00 per hour 14.00 Manufacturing overhead (1/6 1.4 hours 12.00 per hour 16.80 variable) Total standard cost per jacket 40.00 The following additional information relating to the new jacket is available: The only variable selling, general and administrative costs on the jacket will be 4 per jacket for shipping. Fixed selling, general, and administrative costs will be (per year) Salaries 90.000 Advertising and other 384.000 Total 474.000 a. Since the company manufactures many products, it is felt that no more than 21.000 hours of labor time per year can be devoted to production of the new jackets. b. An investment of C900,000 will be necessary to carry inventories and accounts receivable and to purchase some new equipment. The company desires a 25% ROI in new product lines. c. Manufacturing overhead costs are allocated to products on the basis of direct labor- hours a. complete worksheet "Answer Sheet.xlsx". From this worksheet, answer the following questions: What is the maximum number of jackets the company can produce cach year? b. What is the markup percentage required to achieve the company's desired 25% ROI under the following: (i) absorption costing (ii) contribution costing c. What is the target selling price required to achieve the company's desired ROI of 25%? What would be the target selling price if the ROI were 15%? d. (1)- What is the projected net operating income to achieve the company's desired ROI of 25% under absorption costing and contribution costing? (ii)- Is the net operating income is the same under both approaches? Explain why or why not. c. After marketing the jackets for several years, the company is experiencing a falloff in demand due to an economic recession. A large retail outlet will make a bulk purchase of jackets if its label is sewn in and if an acceptable price can be worked out. What is the minimum acceptable price for this order? Euclid Fashions, Inc. has designed a sport jacket that is about to be introduced on the market. A standard cost card has been prepared for the new jacket, as shown below: Standard quantity of Standard price Standard hours or rate unit cost Direct materials 2.0 metres 4.60 per metre 9.20 Direct labour 1.4 hours 10.00 per hour 14.00 Manufacturing overhead (1/6 1.4 hours 12.00 per hour 16.80 variable) Total standard cost per jacket 40.00 The following additional information relating to the new jacket is available: The only variable selling, general and administrative costs on the jacket will be 4 per jacket for shipping. Fixed selling, general, and administrative costs will be (per year) Salaries 90.000 Advertising and other 384.000 Total 474.000 a. Since the company manufactures many products, it is felt that no more than 21.000 hours of labor time per year can be devoted to production of the new jackets. b. An investment of C900,000 will be necessary to carry inventories and accounts receivable and to purchase some new equipment. The company desires a 25% ROI in new product lines. c. Manufacturing overhead costs are allocated to products on the basis of direct labor- hours a. complete worksheet "Answer Sheet.xlsx". From this worksheet, answer the following questions: What is the maximum number of jackets the company can produce cach year? b. What is the markup percentage required to achieve the company's desired 25% ROI under the following: (i) absorption costing (ii) contribution costing c. What is the target selling price required to achieve the company's desired ROI of 25%? What would be the target selling price if the ROI were 15%? d. (1)- What is the projected net operating income to achieve the company's desired ROI of 25% under absorption costing and contribution costing? (ii)- Is the net operating income is the same under both approaches? Explain why or why not. c. After marketing the jackets for several years, the company is experiencing a falloff in demand due to an economic recession. A large retail outlet will make a bulk purchase of jackets if its label is sewn in and if an acceptable price can be worked out. What is the minimum acceptable price for this order
