Q1. Product Cost Concept of Product Pricing

La Mujer Accessories Inc. produces women's handbags. The cost of producing 1,270 handbags is as follows

Direct materials	$15,700
Direct labor	7,600
Factory overhead	6,000
Total manufacturing cost	$29,300

The selling and administrative expenses are $27,600. The management wants a profit equal to 16% of invested assets of $503,000.

If required, round your answers to nearest whole number.

a. Determine the amount of desired profit from the production and sale of 1,270 handbags. $fill in the blank 1

b. Determine the product cost per unit for the production of 1,270 handbags. $fill in the blank 2per unit

c. Determine the product cost markup percentage for handbags. fill in the blank 3 %

d. Determine the selling price of handbags.

Cost	$fill in the blank 4	per unit
Markup	fill in the blank 5	per unit
Selling price	$fill in the blank 6	per unit

Q2. eBook

Print Item

Question Content Area

Target Costing

Basic Motor Corporation uses target costing. Assume that Basic marketing personnel estimate that the competitive selling price for the QuikCar in the upcoming model year will need to be $23,800. Assume further that the QuikCar's total unit cost for the upcoming model year is estimated to be $19,400 and that Basic requires a 20% profit margin on selling price (which is equivalent to a 25% markup on total cost).

a. What price will Basic establish for the QuikCar for the upcoming model year? $fill in the blank 1

Q3. Product Decisions Under Bottlenecked Operations

Youngstown Glass Company manufactures three types of safety plate glass: large, medium, and small. All three products have high demand. Thus, Youngstown Glass is able to sell all the safety glass it can make. The production process includes an autoclave operation, which is a pressurized heat treatment. The autoclave is a production bottleneck. Total fixed costs are $115,000 for the company as a whole. In addition, the following information is available about the three products:

	Large	Medium	Small
Unit selling price	$207		$297		$149
Unit variable cost	163		243		131
Unit contribution margin	$ 44		$54		$18
Autoclave hours per unit	4		6		2
Total process hours per unit	8		12		6
Budgeted units of production	2,200		2,200		2,200

a. Determine the contribution margin by glass type and the total company income from operations for the budgeted units of production.

	Large	Medium	Small	Total
Units produced	fill in the blank 1	fill in the blank 2	fill in the blank 3
Revenues	$fill in the blank 4	$fill in the blank 5	$fill in the blank 6	$fill in the blank 7
Less: Variable costs	fill in the blank 8	fill in the blank 9	fill in the blank 10	fill in the blank 11
Contribution margin	$fill in the blank 12	$fill in the blank 13	$fill in the blank 14	$fill in the blank 15
Less: Fixed costs				fill in the blank 16
Income from operations				$fill in the blank 17

b. Prepare an analysis showing which product is the most profitable per bottleneck hour. Round the "Unit contribution margin per production bottleneck hour" amounts to the nearest cent.

	Large	Medium	Small
Unit contribution margin	$fill in the blank 18	$fill in the blank 19	$fill in the blank 20
Autoclave hours per unit	fill in the blank 21	fill in the blank 22	fill in the blank 23
Unit contribution margin per production bottleneck hour	$fill in the blank 24	$fill in the blank 25	$fill in the blank 26

Q4. Activity-Based Costing

CardioTrainer Equipment Company manufactures stationary bicycles and treadmills. The products are produced in the Fabrication and Assembly production departments. In addition to production activities, several other activities are required to produce the two products. These activities and their associated activity rates are as follows:

Activity	Activity Rate
Fabrication	$33 per machine hour (mh)
Assembly	$11 per direct labor hour (dlh)
Setup	$50 per setup
Inspecting	$30 per inspection
Production scheduling	$13 per production order
Purchasing	$4 per purchase order

The activity-base usage quantities and units produced for each product were as follows:

	Stationary Bicycle	Treadmill
Machine hours	1,870			820
Direct labor hours	470			160
Setups	30			20
Inspections	790			400
Production orders	40			10
Purchase orders	140			130
Units produced	1,000			1,000

Use the activity rate and usage information to compute the total activity costs and the activity costs per unit for each product. If required, round your answers to two decimal places.

Activity	Stationary Bicycle Activity Cost	Treadmill Activity Cost
Fabrication	$fill in the blank 1				$fill in the blank 2
Assembly	fill in the blank 3				fill in the blank 4
Setup	fill in the blank 5				fill in the blank 6
Inspecting	fill in the blank 7				fill in the blank 8
Production scheduling	fill in the blank 9				fill in the blank 10
Purchasing	fill in the blank 11				fill in the blank 12
Total	$fill in the blank 13				$fill in the blank 14
Number of units	fill in the blank 15				fill in the blank 16
Activity cost per unit	$fill in the blank 17				$fill in the blank 18

Q5. eBook

Print Item

Question Content Area

Total Cost Concept of Product Pricing

Smart Stream Inc. uses the total cost concept of applying the cost-plus approach to product pricing. The costs of producing and selling 3,500 cellular phones are as follows:

Variable costs:		Fixed costs:
Direct materials	$ 87		Factory overhead	$152,800
Direct labor	40		Selling and administrative expenses	53,700
Factory overhead	26
Selling and administrative expenses	21
Total	$174

Smart Stream wants a profit equal to a 14% rate of return on invested assets of $454,350.

a. Determine the total costs and the total cost amount per unit for the production and sale of 3,500 units of cellular phones.

Total costs	$fill in the blank 1
Cost amount per unit	$fill in the blank 2

b. Determine the total cost markup percentage for cellular phones. Rounded to two decimal places. fill in the blank 3%

c. Determine the selling price of cellular phones. Round to the nearest cent. $fill in the blank 4per phone

Q6. Variable Cost Concept of Product Pricing

Smart Stream Inc. uses the variable cost concept of applying the cost-plus approach to product pricing. The costs of producing and selling 7,500 cellular phones are as follows:

Variable costs:		Fixed costs:
Direct materials	$ 85		Factory overhead	$396,300
Direct labor	39		Selling and administrative expenses	139,200
Factory overhead	26
Selling and administrative expenses	20
Total	$170

Smart Stream wants a profit equal to a 15% rate of return on invested assets of $595,000.

a. Determine the variable costs and the variable cost amount per unit for the production and sale of 7,500 cellular phones.

Total variable costs	$fill in the blank 1
Variable cost amount per unit	$fill in the blank 2

b. Determine the variable cost markup percentage for cellular phones. fill in the blank 3 %

c. Determine the selling price of cellular phones. Round to the nearest cent. $fill in the blank 4 per cellular phone