at the table canbe priced comf ant, presents Alvarez with the f 200 tables: $ 5 000

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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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
Transcribed Image Text: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
c) Li insists that the two inches are an absolute necessity in terms of the
table's design. She believes thatspending an additional $7,000 on better
marketing will allow Pacific to sell the tables for $2,200. If this isthe case,
will the table's target cost be achieved without any value engineering?
d) Compare the total operating income on the 200 tables for requirements 2
and 3. What do you recommendPacific do, based solely on your
calculations? Explain briefly.
Transcribed Image Text:c) Li insists that the two inches are an absolute necessity in terms of the table's design. She believes thatspending an additional $7,000 on better marketing will allow Pacific to sell the tables for $2,200. If this isthe case, will the table's target cost be achieved without any value engineering? d) Compare the total operating income on the 200 tables for requirements 2 and 3. What do you recommendPacific do, based solely on your calculations? Explain briefly.
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