Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Example 3: ABC Ltd. Recently began production of a new product . M, which required the investment of * 1600000 in assets. The costs of

image text in transcribed

Example 3: ABC Ltd. Recently began production of a new product . M, which required the investment of * 1600000 in assets. The costs of producing and selling 80000 units of Product Mare estimated as follows: Variable Costs: Direct Materials Direct Labour Factory overhead Selling and administrative expenses 10.00 6.00 4.00 5.00 Total 25.00 (Per unit) Fixed Costs: Factory Overhead Selling and administrative expenses 800000 400000 ABC Ltd is currently considering establishing a selling price for Product M. The President of ABC Ltd has decided to use the cost-plus approach to product pricing and has indicated that Product M must earn a 10% rate of return on invested assets. Instructions: (0) Determine the amount of desired profit from the production and sale of Product M. Assuming that the total cost concept is used, determine (a) the cost amount per unit, (b) the mark-up percentage, and (c) the selling price of Product M. Assuming that the total manufacturing cost concept is used, determine (a) the cost amount per unit, (b) the mark up percentage, and (c) the selling price of Product M. (iv) Assuming that the variable cost concept is used, determine (a) the cost amount per unit, (b) the mark up percentage, and (c) the selling price of Product M. Assume that for the current year, the selling price of Product M was * 42 per unit. To date, 60,000 units have been produced and sold, and analysis of the domestic market indicates that 15,000 additional units are expected to be sold during the remainder of the year. Recently, ABC Ltd received an offer from XYZ Ltd for 4,000 units of product Mat 28 each. XYZ Ltd. will market the units in Korea under its own brand name, and no selling and administrative expenses associated with the sale will be incurred by ABC Ltd. The additional business is not expected to affect the domestic sales of Product M, and the additional units could be produced during the sale to XYZ Ltd (b) Based upon the differential analysis report in (a), should the proposal be current year, using existing capacity. (a) Prepare a differential analysis report of the proposed accepted

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image_2

Step: 3

blur-text-image_3

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Advanced Management Accounting

Authors: Robert S. Kaplan, Anthony A. Atkinson, Kaplan And Atkinson

3rd Edition

0132622882, 978-0132622882

More Books

Students also viewed these Accounting questions

Question

Which is worseavoiding responsibility or avoiding conflict? Why?

Answered: 1 week ago

Question

=+How is CSR different from strategic CSR?

Answered: 1 week ago