Accounting Questionnaire

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Bramble Computer Parts Inc. is in the process of setting a selling price on a new component it has just
designed and developed. The following cost estimates for this new component have been provided by the
accounting department for a budgeted volume of 44,000 units.
Per Unit
Total
Direct materials
$ 49
Direct labor
$ 24
Variable manufacturing overhead
$ 24
Fixed manufacturing overhead
$ 528,000
Variable selling and administrative expenses
$ 15
Fixed selling and administrative expenses
$352,000
Bramble Computer Parts management requests that the total cost per unit be used in cost-plus pricing its
products. On this particular product, management also directs that the target price be set to provide a 22%
return on investment (ROI) on invested assets of $ 1,000,000.
(a)
Your answer is partially correct.
Compute the markup percentage and target selling price that will allow Bramble Computer Parts to
earn its desired ROI of 22% on this new component. (Round markup percentage to 2 decimal places,
e.g. 10.50%.)
education.wiley.com
6 WileyPLUS (new)
Question 2 of 6
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0.5 / 2
Bramble Computer Parts management requests that the total cost per unit be used in cost-plus pricing its
products. On this particular product, management also directs that the target price be set to provide a 22%
return on investment (ROI) on invested assets of $ 1,000,000.
(a)
Your answer is partially correct.
Compute the markup percentage and target selling price that will allow Bramble Computer Parts to
earn its desired ROI of 22% on this new component. (Round markup percentage to 2 decimal places,
e.g. 10.50%.)
Markup percentage
3.8
%
Target selling price
$
135.81
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(b)
The parts of this question must be completed in order. This part will be available when you complete the
part above.
6:49 PM Sat Nov 6
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Crane’s Recording Studio rents studio time to musicians in 2-hour blocks. Each session includes the use of
the studio facilities, a digital recording of the performance, and a professional music producer/mixer.
Anticipated annual volume is 1,000 sessions. The company has invested $2,316,000 in the studio and
expects a return on investment (ROI) of 20%. Budgeted costs for the coming year are as follows.
Per
Session
Total
Direct materials (CDs, etc.)
Direct labor
Variable overhead
$
Fixed overhead
945,000
Variable selling and administrative expenses
Fixed selling and administrative expenses
490,000
(a)
Determine the total cost per session.
Total cost $
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20
$
395
$
45
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35
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Done< AA Ć Cost-Plus and Variable-Cost Pricing LEARNING OBJECTIVE 2 Compute a target selling price using cost-plus pricing. Cost-Plus Pricing As discussed, in a competitive product environment, the price of a product is set by the market. In order to achieve its desired profit, the company focuses on achieving a target cost. In a less competitive environment, companies have a greater ability to set the product price. Commonly, when a company sets a product price, it does so as a function of, or relative to, the cost of the product or service. This is referred to as cost-plus pricing. Under cost-plus pricing, a company first determines a cost base and then adds a markup to the cost base to determine the target selling price. If the cost base includes all of the costs required to produce and sell the product, then the markup represents the desired profit. This can be seen in Illustration 21.3, where the markup represents the difference between the selling price and cost-the profit on the product. Selling Price Cost = Markup (Profit) - ILLUSTRATION 21.3 Relation of markup to cost and selling price The size of the markup (profit) depends on the return the company hopes to generate on the amount it has invested. In determining the optimal markup, the company must consider competitive and market conditions, political and legal issues, and other relevant factors. Once the company has determined its cost base and its desired markup, it can add the two together to determine the target selling price. Illustration 21.4 presents the basic cost-plus pricing formula. Cost + Markup = Target Selling Price ILLUSTRATION 21.4 Cost-plus pricing formula To illustrate, assume that Thinkmore Products, Inc. is in the process of setting a selling price on its new video camera pen. It is a functioning pen that records up to 2 hours of audio and video. The per unit variable cost estimates for the video camera pen are as shown in Illustration 21.5. Per Unit Direct materials $23 Direct labor 17 Variable manufacturing overhead 12 Variable selling and administrative expenses 8 Variable cost per unit $60 ILLUSTRATION 21.5 Variable cost per unit To produce and sell its product, Thinkmore incurs fixed manufacturing overhead of $350,000 and fixed education.wiley.com6:50 PM Sat Nov 6 education.wiley.com ← WileyPLUS (new) Question 4 of 6 - /2 = Swifty Corporation needs to set a target price for its newly designed product M14-M16. The following data relate to this new product. Per Total Unit Direct materials $23 Direct labor $36 Variable manufacturing overhead $14 Fixed manufacturing overhead $1,264,000 Variable selling and administrative expenses $7 Fixed selling and administrative expenses $ 1,106,000 These costs are based on a budgeted volume of 79,000 units produced and sold each year. Swifty uses cost- plus pricing methods to set its target selling price. The markup percentage on total unit cost is 50%. (a) Compute the total variable cost per unit, total fixed cost per unit, and total cost per unit for M14-M16. Variable cost per unit $ Fixed cost per unit Total cost per unit $ eTextbook and Media Save for Later +A6:51 PM Sat Nov 6 education.wiley.com ← WileyPLUS (new) Question 5 of 6 - /2 Current Attempt in Progress Vaughn Custom Electronics (VCE) sells and installs complete security, computer, audio, and video systems for homes. On newly constructed homes it provides bids using time-and-material pricing. The following budgeted cost data are available. Material Loading Time Charges Charges Technicians' wages and benefits $ 134,400 Parts manager's salary and benefits $ 34,000 Office employee's salary and benefits 23,520 11,000 Other overhead 15,680 45,000 Total budgeted costs $ 173,600 $ 90,000 The company has budgeted for 5,600 hours of technician time during the coming year. It desires a $39 profit margin per hour of labor and an 80% profit on parts. It estimates the total invoice cost of parts and materials in 2020 will be $750,000. (a) Compute the rate charged per hour of labor. (Round answer to 2 decimal places, e.g. 10.50.) Labor rate per hour eTextbook and Media Save for Later Attempts: 0 of 3 used Submit Answer6:51 PM Sat Nov 6 Done< AA ← WileyPLUS (new) education.wiley.com Question 6 of 6 - 12 View Policies Current Attempt in Progress Crane Inc. has two divisions. Division A makes and sells student desks. Division B manufactures and sells reading lamps. Each desk has a reading lamp as one of its components. Division A can purchase reading lamps at a cost of $ 10 from an outside vendor. Division A needs 9,200 lamps for the coming year. Division B has the capacity to manufacture 49,100 lamps annually. Sales to outside customers are estimated at 39,900 lamps for the next year. Reading lamps are sold at $ 11 each. Variable costs are $7 per lamp and include $1 of variable sales costs that are not incurred if lamps are sold internally to Division A. The total amount of fixed costs for Division B is $ 86,700. Consider the following independent situations. (a) What should be the minimum transfer price accepted by Division B for the 9,200 lamps and the maximum transfer price paid by Division A? Minimum transfer price accepted by Division B $ per unit Maximum transfer price paid by Division A per unit eTextbook and Media Save for Later LA Ć Attempts: 0 of 3 used Submit Answereducation.wiley.com ← WileyPLUS (new) Question 2 of 6 1/2 = Compute the markup percentage and target selling price that will allow Bramble Computer Parts to earn its desired ROI of 22% on this new component. (Round markup percentage to 2 decimal places, e.g. 10.50%.) Markup percentage 3.8 % Target selling price $ 137 eTextbook and Media Assistance Used Attempts: 2 of 3 used (b) Assuming that the volume is 35,200 units, compute the markup percentage and target selling price that will allow Bramble Computer Parts to earn its desired ROI of 22% on this new component. (Round answers to 2 decimal places, e.g. 10.50% or 10.50.) Markup percentage % Target selling price $ eTextbook and Media Save for Later Attempts: 0 of 3 used Submit Answer9:08 PM Sat Nov 6 Done < AA ← WileyPLUS (new) Ć education.wiley.com Question 3 of 6 (b) Determine the desired ROI per session. (Round answer to 2 decimal places, e.g. 10.50.) ROI $ per session eTextbook and Media Save for Later Attempts: 0 of 3 used Submit Answer (c) The parts of this question must be completed in order. This part will be available when you complete the part above. (d) The parts of this question must be completed in order. This part will be available when you complete the part above. 0.5/2 Attempts: 1 of 3 used9:11 PM Sat Nov 6 Done< AA education.wiley.com Ć Time-and-Material Pricing LEARNING OBJECTIVE 3 Use time-and-material pricing to determine the cost of services provided. Another variation on cost-plus pricing is time-and-material pricing. Under this approach, the company sets two pricing rates-one for the labor used on a job and another for the material. The labor rate includes the hourly rate paid for direct labor time and other employee costs. The material charge is based on the cost of direct parts and materials used and a material loading charge for related overhead costs. Time-and-material pricing is widely used in service industries, especially professional firms such as public accounting, law, engineering, and consulting firms, as well as construction companies, repair shops, and printers. To illustrate a time-and-material pricing situation, assume the data shown in Illustration 21.13 for Lake Holiday Marina, a boat and motor repair shop. Lake Holiday Marina Budgeted Costs for the Year 2020 Material Time Loading Charges Charges* Mechanics' wages and benefits $103,500 Parts manager's salary and benefits $11,500 Office employee's salary and benefits 20,700 2,300 26,800 14,400 Other overhead (supplies, depreciation, property taxes, advertising, utilities) Total budgeted costs $151,000 $28,200 The material loading charges exclude the invoice cost of the materials. ILLUSTRATION 21.13 Total annual budgeted time and material costs Using time-and-material pricing involves three steps: (1) calculate the per hour labor charge, (2) calculate the charge for obtaining and holding materials, and (3) calculate the charges for a particular job. Step 1: Calculate the Labor Rate. The first step for time-and-material pricing is to determine a charge for labor time. The charge for labor time is expressed as a rate per hour of labor. This rate includes (1) the direct labor cost of the employees, including hourly pay rate plus fringe benefits; (2) selling, administrative, and similar overhead costs; and (3) an allowance for a desired profit or ROI per hour of employee time. In some industries, such as repair shops for autos and boats, the same hourly labor rate is charged regardless of which employee performs the work. In other industries, the rate that is charged is adjusted according to classification or level of the employee. A public accounting firm, for example, would charge different rates for the services of an assistant, senior, manager, or partner; a law firm would charge different rates for the work of a paralegal, associate, or partner. Illustration 21.14 shows computation of the hourly charges for Lake Holiday Marina during 2020. The marina budgets 5.000 annual labor hours in 2020. and it desires a profit margin of $8 per hour of labor.9:52 PM Sat Nov 6 education.wiley.com ← WileyPLUS (new) Variable cost per unit 21 Fixed cost per unit 89 Total cost per unit 110 eTextbook and Media Assistance Used Solution Attempts: 3 of 3 used (b) Compute the desired ROI per unit for M14-M16. Desired ROI $ eTextbook and Media Save for Later Attempts: 0 of 3 used Submit Answer (c) The parts of this question must be completed in order. This part will be available when you complete the part above. Question 4 of 6 per unit 0.17/2 = Purchase answer to see full attachment Explanation & Answer: 6 Questions Tags: accounting Budget ROI User generated content is uploaded by users for the purposes of learning and should be used following Studypool's honor code & terms of service.