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Kyler Builders builds 1,500-square-foot starter tract homes in the fast-growing suburbs of Albany. Land and labor are cheap, and competition among developers is fierce. The homes are "cookie-cutter," with any upgrades added by the buyer after the sale. Kyler Builders' cost per developed sublot are as follows: 5 Click the icon to view the costs.) Kyler Builders would like to earn a profit of 15% of the variable cost of each home sale. Similar homes offered by competing builders sell for $207,000 each. Read the requirements Requirement 1. Which approach to pricing should Kyler Builders emphasize? Why? Kyler will need to emphasize a V approach to pricing. Because the tract homes are stiff competition, Kyler will v control over pricing. - X - X Requirements Data Table Land.... 57,000 1. Which approach to pricing should Kyler Builders emphasize? Why? 2. Will Kyler Builders be able to achieve its target profit levels? Show your computations. 3. Bathrooms and kitchens are typically the most important selling features of a home. Kyler Builders could differentiate the homes by upgrading bathrooms and kitchens. The upgrades would cost $32,000 per home but would enable the company to increase the selling prices by $56,000 per home in general, kitchen and bathroom upgrades typically add at least 150% of their cost to the value of any home.) If Kyler Builders upgrades, what will the new cost-plus price per home be? Should the company differentiate its product in this manner? Show your analysis. Construction. $ 120,000 Landscaping. $ 9,000 Variable marketing costs ...... $ 3,000 Print Done Print Done Click to select your answer(s) and then click Check Answer. parts remaining Clear All Check Answer Lamont Industries has an annual plant capacity of 71,000 units; current production is 51,000 units per year. At the current production volume, the variable cost per unit is $28.00 and the fixed cost per unit is $4.40. The normal selling price of Lamont's product is $50.00 per unit. Lamont has been asked by Bramwall Company to fill a special order for 14,000 units of the product at a special sales price of $24.00 per unit. Bramwall is located in a foreign country where Lamont does not currently operate. Bramwall will market the units in its country under its own brand name, so the special order is not expected to have any effect on Lamont's regular sales. Read the requirements. Requirement 1. How would accepting the special order impact Lamont's operating income? Should Lamont accept the special order? Complete the following incremental analysis to determine the impact on Lamont's operating income if it accepts this special order. (Enter a "0" for any zero balances. Use parentheses or a minus sign to indicate a decrease in contribution margin and/or operating income from the special order.) Total Order Incremental Analysis of Special Sales Order Decision (14,000 units) Revenue from special order - X Requirements Less expenses associated with the order: Less: Variable manufacturing cost Contribution margin 1. How would accepting the special order impact Lamont's operating income? Less: Additional fixed expenses associated with the order Should Lamont accept the special order? 2. How would your analysis change if the special order sales price were to be Increase (decrease) in operating income from the special order $41.00 per unit and Lamont would have to pay an attorney a fee of $10,000 to make sure it is complying with export laws and regulations relating to the special order? Print Done Suppose Quacker is considering discontinuing its yummy pebbles product line. Assume that during the past year, the yummy pebbles' product line income statement showed the following: (Click the icon to view the income statement data.) (Click the icon for additional information.) If the company decides to discontinue the product line, what will happen to the company's operating income? Should Quacker discontinue the yummy pebbles product line? Begin by preparing a contribution margin income statement for the yummy pebbles' product line. (Use a minus sign or parentheses to enter a loss.) Sales revenue Less: Contribution margin Less Operating income (loss) Data Table - X More Info A B 1 Sales revenue $ 7,400,000 6,550,000 2 Less: Cost of goods sold 3 Gross profit 4 Less: Operating expenses Fixed manufacturing overhead costs account for 40% of the cost of goods, while only 30% of the operating expenses are fixed. Since the yummy pebbles line is just one of the company's cereal operations, only $775,000 of direct fixed costs (the majority of which is advertising) will be eliminated if the product line is discontinued. The remainder of the fixed costs will still be incurred by the company. 850,000 1,350,000 5 Operating income (loss) $ (500,000) Print Done Print Done Choose from any list or enter any number in the input fields and then click Check Answer. parts Clear All Check Answer remaining E8-29A (similar to) Question Help Marco Enterprises manufactures one of the components used to assemble its main company product. Specialty Products, Inc., has offered to make the component This current cost per unit is based on the following calculations: at a cost of $13.10 per unit. Marco Enterprises' current cost is $15.50 per unit of the component, based on the 90,000 components that Marco Enterprises currently Click the icon to view the information.) produces Read the requirements. None of Marco Enterprises' fixed costs will be eliminated if the component is outsourced. However, the freed capacity could be used to build a new product. This new product would be expected to generate $31,000 of contribution margin per year. Requirement 1. If Marco Enterprises outsources the manufacturing of the component, will operating income increase or decrease? By how much? (Enter a "0" for any zero balances. Use a minus sign or parentheses in the Difference column when the cost to make exceeds the cost to buy.) Make Outsource Incremental Analysis Outsourcing Decision Variable costs Component Component Difference Plus: Fixed costs Total cost of 90,000 components Less: Profit from another product Data Table - X Requirements Net cost 5.75 5.25 Direct material per unit. $ Direct labor per unit. Variable manufacturing overhead per unit Fixed manufacturing overhead per unit $ Total manufacturing costs per unit ........ 1. If Marco Enterprises outsources the manufacturing of the component, will operating income increase or decrease? By how much? 2. What is the maximum price per unit Marco Enterprises would be willing to pay if it outsources the component? 3.00 1.50 15.50 Print Done Print Done