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1) Management at Kirkland Machine Tool Co. is considering the development of a new automated drill press called the Auto Drill. After conferring with the design engineers., the controller's staff assembled the following data about this project. Target selling price $ 7,500.00 per unit Desired profit percentage 25% of total unit cost Projected unit demand 4500 units Activity-based cost rates Materials handling activity 5% of raw materials and purchased parts cost $300 per unit for Auto Drill $50 per machine hour $570 per unit for Auto Drill $400 per unit for Auto Drill Engineering activity Production and assembly activity Delivery activity Marketing activity Per unit data Raw Materials cost $ 1,620.00 Purchased parts cost $ 840.00 Manufacturing labor hours 6 hours Hourly rate $ 14.00 Assembly labor hours 10 hours Hourly labor rate $ 15.00 Machine hours 30 hours A) Compute the product's Target cost. B) Compute the product's projected unit cost based on the design engineers estimates. C) should management produce and market the Auto Drill? Defend your answer.

1) Management at Kirkland Machine Tool Co. is considering the development of a new automated drill press called the Auto Drill. After conferring with the design engineers., the controller's staff assembled the following data about this project. Target selling price $ 7,500.00 per unit Desired profit percentage 25% of total unit cost Projected unit demand 4500 units Activity-based cost rates Materials handling activity 5% of raw materials and purchased parts cost $300 per unit for Auto Drill $50 per machine hour $570 per unit for Auto Drill $400 per unit for Auto Drill Engineering activity Production and assembly activity Delivery activity Marketing activity Per unit data Raw Materials cost $ 1,620.00 Purchased parts cost $ 840.00 Manufacturing labor hours 6 hours Hourly rate $ 14.00 Assembly labor hours 10 hours Hourly labor rate $ 15.00 Machine hours 30 hours A) Compute the product's Target cost. B) Compute the product's projected unit cost based on the design engineers estimates. C) should management produce and market the Auto Drill? Defend your answer.

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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2) Milton Company's projected profit for the coming year is as follows: Per Unit Total 2$ 200,000.00 Description Sales $ 20.00 less: Variable expenses 120,000.00 12.00 $ Contribution margin 80,000.00 $ 8.00 Less fixed expenses 64,000.00 Operating income 16,000.00 Required: A) Compute the break- even points in units B) How many unit must be sold to earn a profit of $30,000.00 ? C)Suppose Milton would like to earn operating income equal to 20 percent of sales revenue. How many units must be sold for this goal to be realized? D) For the projected level of sales, compute the margin of safety. ( 8 marks) 3) Molino Company produces ponchos. The company has established the following direct material and direct labor standards for one poncho. (3 yds. @3.00) ( 3.5 hrs. @ $5.00) Wool $ 9.00 labor 17.50 Total Prime cost 26.50 During the first quarter of the year. Molino produced 25,000 ponchos. The company purchased and used 78,200 yards of wool at $2.90 per yard. Actual direct labor used was 90,000 hours at $5.20 per hour. A) Calculate the direct material price and usage variances. B) Calculate the direct labor rate and efficiency variances. (6 marks)
Transcribed Image Text:2) Milton Company's projected profit for the coming year is as follows: Per Unit Total 2$ 200,000.00 Description Sales $ 20.00 less: Variable expenses 120,000.00 12.00 $ Contribution margin 80,000.00 $ 8.00 Less fixed expenses 64,000.00 Operating income 16,000.00 Required: A) Compute the break- even points in units B) How many unit must be sold to earn a profit of $30,000.00 ? C)Suppose Milton would like to earn operating income equal to 20 percent of sales revenue. How many units must be sold for this goal to be realized? D) For the projected level of sales, compute the margin of safety. ( 8 marks) 3) Molino Company produces ponchos. The company has established the following direct material and direct labor standards for one poncho. (3 yds. @3.00) ( 3.5 hrs. @ $5.00) Wool $ 9.00 labor 17.50 Total Prime cost 26.50 During the first quarter of the year. Molino produced 25,000 ponchos. The company purchased and used 78,200 yards of wool at $2.90 per yard. Actual direct labor used was 90,000 hours at $5.20 per hour. A) Calculate the direct material price and usage variances. B) Calculate the direct labor rate and efficiency variances. (6 marks)
1) Management at Kirkland Machine Tool Co. is considering the development of a new automated drill press called the Auto Drill. After conferring with the design engineers., the controller's staff assembled the following data about this project. Target selling price $ 7,500.00 per unit Desired profit percentage 25% of total unit cost Projected unit demand 4500 units Activity-based cost rates Materials handling activity 5% of raw materials and purchased parts cost $300 per unit for Auto Drill $50 per machine hour $570 per unit for Auto Drill $400 per unit for Auto Drill Engineering activity Production and assembly activity Delivery activity Marketing activity Per unit data $ 1,620.00 $ Raw Materials cost Purchased parts cost 840.00 Manufacturing labor hours 6 hours Hourly rate $ 14.00 Assembly labor hours 10 hours Hourly labor rate $ 15.00 Machine hours 30 hours A) Compute the product's Target cost. B) Compute the product's projected unit cost based on the design engineers estimates. C) should management produce and market the Auto Drill? Defend your answer.
Transcribed Image Text:1) Management at Kirkland Machine Tool Co. is considering the development of a new automated drill press called the Auto Drill. After conferring with the design engineers., the controller's staff assembled the following data about this project. Target selling price $ 7,500.00 per unit Desired profit percentage 25% of total unit cost Projected unit demand 4500 units Activity-based cost rates Materials handling activity 5% of raw materials and purchased parts cost $300 per unit for Auto Drill $50 per machine hour $570 per unit for Auto Drill $400 per unit for Auto Drill Engineering activity Production and assembly activity Delivery activity Marketing activity Per unit data $ 1,620.00 $ Raw Materials cost Purchased parts cost 840.00 Manufacturing labor hours 6 hours Hourly rate $ 14.00 Assembly labor hours 10 hours Hourly labor rate $ 15.00 Machine hours 30 hours A) Compute the product's Target cost. B) Compute the product's projected unit cost based on the design engineers estimates. C) should management produce and market the Auto Drill? Defend your answer.
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