Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Gerber Clothing Inc. has designed a rain suit for outdoor enthusiasts that is about to be introduced on the market A standard cost card has
Gerber Clothing Inc. has designed a rain suit for outdoor enthusiasts that is about to be introduced on the market A standard cost card has been prepared for the new suit, as follows: Standard Standard price Standard Cost 10 per metre $23.00 32.00 36.00 or Rate 32 per hour 36 per hour Quantity or hours Direct materials Direct labour Manufacturing overhead (1/6 variable) 2.3 metres 1.0 hours 1.0 hours Total standard cost per suit $91.00 a The only variable selling and administrative costs will be $10 per suit for shipping. Fixed seling and administrative costs will be as follows (per year) Salaries Advertising and other 38,880 175,000 Total $213,880 b. Since the company manufactures many products, it is felt that no more than 10,400 hours of labour time per year can be devoted to production of the new suits. c. An investment of $540,000 will be necessary to carry inventories and accounts receivable and to purchase some new equipment. The company wants a 20% ROI in new product lines. d. Manufacturing overhead costs are allocated to products on the basis of direct labour-hours. Required 1. Assume that the company uses the absorption approach to cost-plus pricing. Compute the markup that the company needs on the rain suits to achieve a 20% ROI if it sells all of the suits it can produce using 10,400 hours of labour time a. Markup percentage
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started