Regular Company produces audio equipment, specifically headphones and speakers. A new CEO has just been hired and announces a new policy that if a product cannot earn a markup of at least 25 percent, it will be dropped. The markup is computed as product gross profit divided by reported product cost. Manufacturing overhead for year 1 totaled $1,056,000. Overhead is allocated to products based on direct materials cost. Data for year 1 show the following: Sales revenue Direct materials Direct labor Req A1 Required: a-1. Calculate the markup for both headphones and speakers. a-2. Based on the CFO's new policy, which of the two products should be dropped? b. Regardless of your answer in requirement (a), the CFO decides at the beginning of year 2 to drop the speakers from the product line. The company cost analyst estimates that overhead without the speaker line will be $680,000. The revenue and costs for headphones are expected to be the same as last year. What is the estimated markup for headphones in year 2? Headphones $ 2,400,640 Complete this question by entering your answers in the tabs below. Req A2 Headphones 780,000 512,000 Markup % Speakers $ 2,283,440 980,000 272,000 Req B Calculate the markup for both headphones and speakers. (Enter your answers as a percentage rounded to 1 decimal place (i.e., 32.1).)
Regular Company produces audio equipment, specifically headphones and speakers. A new CEO has just been hired and announces a new policy that if a product cannot earn a markup of at least 25 percent, it will be dropped. The markup is computed as product gross profit divided by reported product cost. Manufacturing overhead for year 1 totaled $1,056,000. Overhead is allocated to products based on direct materials cost. Data for year 1 show the following: Sales revenue Direct materials Direct labor Req A1 Required: a-1. Calculate the markup for both headphones and speakers. a-2. Based on the CFO's new policy, which of the two products should be dropped? b. Regardless of your answer in requirement (a), the CFO decides at the beginning of year 2 to drop the speakers from the product line. The company cost analyst estimates that overhead without the speaker line will be $680,000. The revenue and costs for headphones are expected to be the same as last year. What is the estimated markup for headphones in year 2? Headphones $ 2,400,640 Complete this question by entering your answers in the tabs below. Req A2 Headphones 780,000 512,000 Markup % Speakers $ 2,283,440 980,000 272,000 Req B Calculate the markup for both headphones and speakers. (Enter your answers as a percentage rounded to 1 decimal place (i.e., 32.1).)
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Regular Company produces audio equipment, specifically headphones and speakers. A new CEO has just been hired and announces
a new policy that if a product cannot earn a markup of at least 25 percent, it will be dropped. The markup is computed as product
gross profit divided by reported product cost.
Manufacturing overhead for year 1 totaled $1,056,000. Overhead is allocated to products based on direct materials cost. Data for year
1 show the following:
Sales revenue
Direct materials
Direct labor
Req A1
Required:
a-1. Calculate the markup for both headphones and speakers.
a-2. Based on the CFO's new policy, which of the two products should be dropped?
b. Regardless of your answer in requirement (a), the CFO decides at the beginning of year 2 to drop the speakers from the product
line. The company cost analyst estimates that overhead without the speaker line will be $680,000. The revenue and costs for
headphones are expected to be the same as last year. What is the estimated markup for headphones in year 2?
Headphones
$ 2,400,640
Complete this question by entering your answers in the tabs below.
Req A2
Headphones
780,000
512,000
Markup
%
Speakers
$ 2,283,440
980,000
272,000
Req B
Calculate the markup for both headphones and speakers. (Enter your answers as a percentage rounded to 1 decimal place
(i.e., 32.1).)
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