377ncesMcGrawHillE4-20 (Algo) Calculating Target Cost [LO 4-8]Majesty Company uses target costing to ensure that its products are profitable. Assume Majesty is planning to introduce a newproduct with the following estimates:Estimated market priceAnnual demandLife cycleTarget profitRequired:$ 1,30087,0001. Target Cost2. Target Cost3. Target Costunitsyears729 percentage return on sales.1. Compute the target cost of this product.2. Compute the target cost if Majesty wants a 42 percent return on sales.3. Compute the target cost if Majesty wants a 11 percent return on sales.< Prev2 of 3Next >

TARGET COSTINGTarget Costing initiates cost management at the earliest stages of product development…

37 t nces Mc Graw Hill E4-20 (Algo) Calculating Target Cost [LO 4-8] Majesty Company uses target costing to ensure that its products are profitable. Assume Majesty is planning to introduce a new product with the following estimates: Estimated market price Annual demand Life cycle Target profit $ 1,300 87,000 1. Target Cost 2. Target Cost 3. Target Cost units years 7 29 percentage return on sales. Required: 1. Compute the target cost of this product. 2. Compute the target cost if Majesty wants a 42 percent return on sales. 3. Compute the target cost if Majesty wants a 11 percent return on sales. < Prev 2 of 3 Next >

37 t nces Mc Graw Hill E4-20 (Algo) Calculating Target Cost [LO 4-8] Majesty Company uses target costing to ensure that its products are profitable. Assume Majesty is planning to introduce a new product with the following estimates: Estimated market price Annual demand Life cycle Target profit $ 1,300 87,000 1. Target Cost 2. Target Cost 3. Target Cost units years 7 29 percentage return on sales. Required: 1. Compute the target cost of this product. 2. Compute the target cost if Majesty wants a 42 percent return on sales. 3. Compute the target cost if Majesty wants a 11 percent return on sales. < Prev 2 of 3 Next >

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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Assume that a company uses the absorption costing approach to cost-plus pricing. It is considering the introduction of a new product. To determine a selling price, the company has gathered the following information: Number of units to be produced and sold each year Unit product cost Estimated annual selling and administrative expenses Estimated investment required by the company Desired return on investment (ROI) What is the markup percentage on absorption cost required to achieve the desired ROI? 15,000 30 $ $81,900 $780,000 12%
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Majesty Company uses target costing to ensure that its products are profitable. Assume Majesty is planning to introduce a new product with the following estimates: Estimated market price $ 1,500 Annual demand 86,000 units Life cycle 7 years Target profit 26 % return on sales Required: 1. Compute the target cost of this product. 2. Compute the target cost if Majesty wants a 36 percent return on sales. 3. Compute the target cost if Majesty wants a 7 percent return on sales.
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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 $23,400. Assume further that the QuikCar's total unit cost for the upcoming model year is estimated to be $19,900 and that Basic requires a 20% profit margin on selling price (which is equivalent to a 25% markup on total cost). a. What price will Basic establish for the QuikCar for the upcoming model year?$ b. Since the estimated manufacturing cost is less than the target cost, Basic must reduce its total costs to maintain competitive pricing within its profit objectives.
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(e) Product Blue Product Red Selling $12.00 $24.00Variable cost $4.00 $8.00Contribution margin $8.00 $16.00Fixed costs apportioned $200,000 $400,00Budgeted Sales Units 140,000 60,000 Calculate the breakeven points, for each product and the company as a whole and comment on your findings f)Discuss the merits and demerits of the cost volume profit analysis (CVP)
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