Gerber Clothing Inc. has designed a rain sult 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 Cost Standard Quantity or hours 2.7 metres 1.0 hours 1.0 hours Standard price or Rate $10 per metre 39 per hour 30 per hour Direct materials Direct labour Manufacturing overhead (1/6 variable) $27.00 39.00 30.00 $96.00 Total standard cost per suit Sk 1 nces a. The only variable selling and administrative costs will be $7 per suit for shipping. Fixed selling and administrative costs will be as follows (per year): Salaries Advertising and other $ 76,120 336,000 Total $412,120 c. Since the company manufactures many products, it is felt that no more than 10,200 hours of labour time per year can be devoted to production of the new suits. d. An investment of $520,000 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. e. 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. Prev 1 of 1 Next > ng a. Compute the markup that the company needs on the rain suits to achieve a 20% ROI if it sells all of the sults it can produce using 10,200 hours of labour time, Markup porcentage % SK b. Using the markup you have computed, prepare a price quote sheet for a single rain sult. (Round your answers to 2 decimal places.) 1 aces Direct materials Direct labour Manufacturing overhead Unit product cost Add markup of unit product cost Target selling price c-1. Assume that the company is able to sell all of the rain suits that it can produce. Prepare an income statement for the first year of activity, Sales Prey 1 of 1 HE Next > ng O er 12A Assigriment Saved Help c-1. Assume that the company is able to sell all of the rain sults that it can produce. Prepare an income statement for the first year of activity Sales Less cost of goods sold Gross margin Less selling general, and administrative expenses Shipping Salaries Advertising and other Total selling, general and administrative expense Operating income c-2. Compute the company's ROI for the year on the suits, using the ROI formula. (Do not round intermediate calculations.) ROL 96 2. Repeat requirements la and 1 above, assuming that the company uses the total variable costing approach to cost-plus pricing. (Do not round intermediate calculations. Round your answers to 2 decimal places.) Prev 1 of 1 Next ing 51 Salaries Advertising and other Total selling, general and administrative expense Operating income c-2. Compute the company's ROI for the year on the sults, using the ROI formula. (Do not round intermediate calculations.) ROM % 2. Repeat requirements 1a and 1b above, assuming that the company uses the total variable costing approach to cost-plus pricing. (Do not round intermediate calculations. Round your answers to 2 decimal places.) % Markup percentage for the total variable costing Target selling price 3. Not available in Connect Prev 1 of 1 Next 8
