Curl is entering the professional hairdryer market. Research shows that their customers wish to pay $307 or less for each dryer. The estimated cost per unit for each dryer is S160 and the target operating income per unit is $16. The management of Curl is considering the use of the cost-plus approach rather than the target-cost approach. Cost accountants at the manufacturer have collected the following information: Direct Materials /unit 50 Direct labor/unit 30 Variable overhead 30 Fixed costs annually 206,250 Estimated production for year one 3,750 1. Do you think that it's a good idea for Curl to use the cost-plus approach to price the hairdryer? 2. What strategies could Curl's management use to make a profit if the company insisted on using the cost-plus approach to price the hairdryer?

Curl is entering the professional hairdryer market. Research shows that their customers wish to pay $307 or less for each dryer. The estimated cost per unit for each dryer is S160 and the target operating income per unit is $16. The management of Curl is considering the use of the cost-plus approach rather than the target-cost approach. Cost accountants at the manufacturer have collected the following information: Direct Materials /unit 50 Direct labor/unit 30 Variable overhead 30 Fixed costs annually 206,250 Estimated production for year one 3,750 1. Do you think that it's a good idea for Curl to use the cost-plus approach to price the hairdryer? 2. What strategies could Curl's management use to make a profit if the company insisted on using the cost-plus approach to price the hairdryer?

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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