Mendenhall Company is about to enter the highly competitive personal electronics market with a new optical reader. In anticipation of future growth, the company has leased a large manufacturing facility and has purchased several expensive pieces of equipment. In 2013, the company's first year, Mendenhall budgets for production and sales of 27,000 units, compared with its practical capacity of 69,750. The company's cost data are as follows: (Click the icon to view the company's cost data.) Read the requirements. i X Requirements 1. Assume that Mendenhall uses absorption costing and uses budgeted units produced as the denominator for calculating its fixed manufacturing overhead rate. Selling price is set at 140% of manufacturing cost. Compute Mendenhall's selling price. 2. Mendenhall enters the market with the selling price computed previously. However, despite growth in the overall market, sales are not as robust as the company had expected, and a competitor has priced its product $18 lower than Mendenhall's. Enrico Mendenhall, the company's president, insists that the competitor must be pricing its product at a loss and that the competitor will be unable to sustain that. In response, Mendenhall makes no price adjustments but budgets production and sales for 2014 at 23,250 units. Variable and fixed costs are not expected to change. Compute Mendenhall's new selling price. Comment on how Mendenhall's choice of budgeted production affected its selling price and competitive position. 3. Recompute the selling price using practical capacity as the denominator level of activity. How would this choice have affected Mendenhall's position in the marketplace? Generally, how would this choice affect the production-volume variance? Print Done Requirement 1. Assume that Mendenhall uses absorption costing and uses budgeted units produced as the denominator for calculating its fixed manufacturing overhead rate. Selling price is set at 140% of manufacturing cost. Compute Mendenhall's selling price. Begin by determining the formula to compute the selling price. Selling price (Round your answer to the nearest cent.) Mendenhall's selling price would be $ Requirement 2. Mendenhall enters the market with the selling price computed previously. However, despite growth in the overall market, sales are not as robust as the company had expected, and a competitor has priced its product $18 lower than Mendenhall's. Enrico Mendenhall, the company's president, insists that the competitor must be pricing its product at a loss and that the competitor will be unable to sustain that. In response, Mendenhall makes no price adjustments but budgets production and sales for 2014 at 23,250 units. Variable and fixed costs are not expected to change. Compute Mendenhall's new selling price. Comment on how Mendenhall's choice of budgeted production affected its selling price and competitive position. Begin by computing Mendenhall's new selling price. (Round your answer to the nearest cent.) Mendenhall's selling price would be $ Comment on how Mendenhall's choice of budgeted production affected its selling price and competitive position. By using budgeted units produced, and not practical capacity, as the denominator level, Mendenhall is The competitor has not done this, and because of Mendenhall's higher selling price, its sales decline. Consequently, 2014 budgeted quantities are This phenomenon is known as and it causes Mendenhall to continually Requirement 3. Recompute the selling price using practical capacity as the denominator level of activity. How would this choice have affected Mendenhall's position in the marketplace? Generally, how would this choice affect the production-volume variance? (Round your answer to the nearest cent.) Mendenhall's selling price would be $ How would this choice have affected Mendenhall's position in the marketplace? Generally, how would this choice affect the production-volume variance? (Round the selling price to the nearest cent.) If Mendenhall had used practical capacity as its denominator level of activity, its initial selling price (computed in the previous step) would have been the $ selling price of Mendenhall's competitor, and it would likely have resulted in Using practical capacity will result in a unfavorable production-volume variance, which will Mendenhall Company is about to enter the highly competitive personal electronics market with a new optical reader. In anticipation of future growth, the company has leased a large manufacturing facility and has purchased several expensive pieces of equipment. In 2013, the company's first year, Mendenhall budgets for production and sales of 27,000 units, compared with its practical capacity of 69,750. The company's cost data are as follows: (Click the icon to view the company's cost data.) Read the requirements. i X Requirements 1. Assume that Mendenhall uses absorption costing and uses budgeted units produced as the denominator for calculating its fixed manufacturing overhead rate. Selling price is set at 140% of manufacturing cost. Compute Mendenhall's selling price. 2. Mendenhall enters the market with the selling price computed previously. However, despite growth in the overall market, sales are not as robust as the company had expected, and a competitor has priced its product $18 lower than Mendenhall's. Enrico Mendenhall, the company's president, insists that the competitor must be pricing its product at a loss and that the competitor will be unable to sustain that. In response, Mendenhall makes no price adjustments but budgets production and sales for 2014 at 23,250 units. Variable and fixed costs are not expected to change. Compute Mendenhall's new selling price. Comment on how Mendenhall's choice of budgeted production affected its selling price and competitive position. 3. Recompute the selling price using practical capacity as the denominator level of activity. How would this choice have affected Mendenhall's position in the marketplace? Generally, how would this choice affect the production-volume variance? Print Done Requirement 1. Assume that Mendenhall uses absorption costing and uses budgeted units produced as the denominator for calculating its fixed manufacturing overhead rate. Selling price is set at 140% of manufacturing cost. Compute Mendenhall's selling price. Begin by determining the formula to compute the selling price. Selling price (Round your answer to the nearest cent.) Mendenhall's selling price would be $ Requirement 2. Mendenhall enters the market with the selling price computed previously. However, despite growth in the overall market, sales are not as robust as the company had expected, and a competitor has priced its product $18 lower than Mendenhall's. Enrico Mendenhall, the company's president, insists that the competitor must be pricing its product at a loss and that the competitor will be unable to sustain that. In response, Mendenhall makes no price adjustments but budgets production and sales for 2014 at 23,250 units. Variable and fixed costs are not expected to change. Compute Mendenhall's new selling price. Comment on how Mendenhall's choice of budgeted production affected its selling price and competitive position. Begin by computing Mendenhall's new selling price. (Round your answer to the nearest cent.) Mendenhall's selling price would be $ Comment on how Mendenhall's choice of budgeted production affected its selling price and competitive position. By using budgeted units produced, and not practical capacity, as the denominator level, Mendenhall is The competitor has not done this, and because of Mendenhall's higher selling price, its sales decline. Consequently, 2014 budgeted quantities are This phenomenon is known as and it causes Mendenhall to continually Requirement 3. Recompute the selling price using practical capacity as the denominator level of activity. How would this choice have affected Mendenhall's position in the marketplace? Generally, how would this choice affect the production-volume variance? (Round your answer to the nearest cent.) Mendenhall's selling price would be $ How would this choice have affected Mendenhall's position in the marketplace? Generally, how would this choice affect the production-volume variance? (Round the selling price to the nearest cent.) If Mendenhall had used practical capacity as its denominator level of activity, its initial selling price (computed in the previous step) would have been the $ selling price of Mendenhall's competitor, and it would likely have resulted in Using practical capacity will result in a unfavorable production-volume variance, which will