Question 3

Computing Markups The predicted 2009 costs for Osaka Motors are as follows:

Variable	$100,000	Variable	$300,000
Fixed	220,000	Fixed	200,000

Average total assets for 2009 are predicted to be $6,000,000. (a) If management desires a 13 percent rate of return on total assets, what are the markup percentages for total variable costs and for total manufacturing costs? (Round your answers to the nearest whole percent.) Markup on variable costs

Answer __________%

Markup on manufacturing costs

Answer ___________%

(b) If the company desires a 7 percent rate of return on total assets, what is the markup percentage on total manufacturing costs for (1) unassigned costs and (2) desired profit? (Round your answers to the nearest whole percent.)

Markup to cover unassigned costs

Answer ___________%

Markup to cover desired profit

Answer ___________%

Question 4

Product Pricing: Two Products

Quality Data manufactures two products, CDs and DVDs, both on the same assembly lines and packaged 10 disks per pack. The predicted sales are 400,000 packs of CDs and 500,000 packs of DVDs. The predicted costs for the year 2009 are as follows:

Materials	$100,000	$600,000
Other	250,000	600,000

Each product uses 50 percent of the materials costs. Based on manufacturing time, 40 percent of the other costs are assigned to the CDs, and 60 percent of the other costs are assigned to the DVDs. The management of Quality Data desires an annual profit of $150,000. (a) What price should Quality Data charge for each disk pack if management believes the DVDs sell for 20 percent more than the CDs? Round answers to the nearest cent. CDs $ ____________

DVDs $ _____________

(b) What is the total profit per product using the selling prices determined in part (a)? Usenegative signs with answers, if appropriate.

CDs $ _____________

DVDs $ ____________

Question 1

Product Pricing: Single Product

Presented is the 2009 contribution income statement of Colgate Products.

Sales (12,000 units)		$1,440,000
Less variable costs
Cost of goods sold	$480,000
Selling and administrative	132,000	(612,000)
Contribution margin		828,000
Less fixed costs
Manufacturing overhead	510,000
Selling and administrative	220,000	(730,000)
Net income		$98,000

During the coming year, Colgate expects an increase in variable manufacturing costs of $8 per unit and in fixed manufacturing costs of $72,000. (a) If sales for 2010 remain at 12,000 units, what price should Colgate charge to obtain the same profit as last year? $ ____________

(b) Management believes that sales can be increased to 16,000 units if the selling price is lowered to $109.What would be the excepted profit (or loss) as a result of this action? Use a negative sign with your answer, if appropriate.

_____________

(c) After considering the expected increases in costs, what sales volume is needed to earn a profit of $98,000 with a unit selling price of $109?

_____________ units