4. Pacific Decor, Inc, designs, manufactures,and sells contemporary woodfurniture. Ling Li is a furniture designer for Pacific. Li has spent much ofthe pastmonth working on the design of a high-end dining room table. The design hasbeen well-received byJose Alvarez, the product development manager. However,Alvarez wants to make sure that the table canbe priced competitively. AmyHoover, Pacific's cost accountant, presents Alvarez with the following costdatafor the expected production of 200 tables:Design cost$ 5,000Direct materials120,000Direct manufacturing laborVariable manufacturing overheadFixed manufacturing overhead142,00064,00046,500Marketing15,000 a) Alvarez thinks that Pacific can successfully market the table for $2,000.The company's target operating income is 10% of revenue. Calculate thetarget full cost of producing the 200 tables. Does the costestimatedeveloped by Hoover meet Pacific's requirements? Is value engineeringneeded?b) Alvarez discovers that Li has designed the table two inches wider than thestandard size of wood normallyused by Pacific. Reducing the table's sizeby two inches will lower the cost of direct materials by40%. However, theredesign will require an additional $6,000 of design cost, and the tablewill be soldfor $1,950. Will this design change allow the table to meet itstarget cost? Are the costs of materials alocked-in cost?

SOLUTION- LIST THE IMPORTANT POINTS TO BE CONSIDERED FOR VALUE ENGINEERING- 1- ANTICIPATING HOW THE…

4. Pacific Decor, Inc., designs, manufactures,and sells contemporary wood furniture. Ling Li is a furniture designer for Pacific. Li has spent much ofthe past month working on the design of a high-end dining room table. The design has been well-received byJose Alvarez, the product development manager. However, Alvarez wants to make sure that the table canbe priced competitively. Amy Hoover, Pacific's cost accountant, presents Alvarez with the following costdata for the expected production of 200 tables: Design cost $ 5,000 Direct materials 120,000 Direct manufacturing labor Variable manufacturing overhead Fixed manufacturing overhead 142,000 64,000 46,500 Marketing 15,000

4. Pacific Decor, Inc., designs, manufactures,and sells contemporary wood furniture. Ling Li is a furniture designer for Pacific. Li has spent much ofthe past month working on the design of a high-end dining room table. The design has been well-received byJose Alvarez, the product development manager. However, Alvarez wants to make sure that the table canbe priced competitively. Amy Hoover, Pacific's cost accountant, presents Alvarez with the following costdata for the expected production of 200 tables: Design cost $ 5,000 Direct materials 120,000 Direct manufacturing labor Variable manufacturing overhead Fixed manufacturing overhead 142,000 64,000 46,500 Marketing 15,000

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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Hiram’s Lakeside is a popular restaurant located on Lake Washington in Seattle. The restaurant's owner wants to better understand his costs and hired a student intern to conduct an activity-based costing study. The intern identified three activities, completed the first-stage cost allocations and gathered the activity measure data shown below. Activity Cost Pool Activity Measure Total Cost Total Activity Serving a party of diners Number of parties served $ 12,760 5,800 parties Serving a diner Number of diners served $ 105,270 12,100 diners Serving drinks Number of drinks ordered $ 24,960 10,400 drinks The above costs exclude organization-sustaining costs such as rent, property taxes, and top-management salaries. Some costs, such as the cost of cleaning the linens that cover the restaurant's tables, vary with the number of parties served. Other costs, such as washing plates and glasses, depend on the number of diners served or the number of drinks served. Prior to the…
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