Euclid Fashions, Inc. has designed a sport jacket that is about to be introduced on the market. A standard cost card has been prepared for the new jacket, as shown below: Standard Standard price quantity of hours Standard or rate €4.60 per metre 10.00 per hour 12.00 per hour unit cost Direct materials 2.0 metres € 9.20 Direct labour 1.4 hours 14.00 1.4 hours Manufacturing overhead (1/6 variable) Total standard cost per jacket 16.80 €40.00 The following additional information relating to the new jacket is available: The only variable selling, general and administrative costs on the jacket will be €4 per jacket for shipping. Fixed selling, general, and administrative costs will be (per year) € 90,000 384.000 € 474,000 Salaries Advertising and other Total a. Since the company manufactures many products, it is felt that no more than 21,000 hours of labor time per year can be devoted to production of the new jackets. b. An investment of €900,000 will be necessary to carry inventories and accounts receivable and to purchase some new equipment. The company desires a 25% ROI in new product lines. c. Manufacturing overhead costs are allocated to products on the basis of direct labor- hours. Answer the following questions: а. What is the maximum number of jackets the company can produce each year? b. What is the markup percentage required to achieve the company's desired 25% ROI under the following: (i) absorption costing (ii) contribution costing
Euclid Fashions, Inc. has designed a sport jacket that is about to be introduced on the market. A standard cost card has been prepared for the new jacket, as shown below: Standard Standard price quantity of hours Standard or rate €4.60 per metre 10.00 per hour 12.00 per hour unit cost Direct materials 2.0 metres € 9.20 Direct labour 1.4 hours 14.00 1.4 hours Manufacturing overhead (1/6 variable) Total standard cost per jacket 16.80 €40.00 The following additional information relating to the new jacket is available: The only variable selling, general and administrative costs on the jacket will be €4 per jacket for shipping. Fixed selling, general, and administrative costs will be (per year) € 90,000 384.000 € 474,000 Salaries Advertising and other Total a. Since the company manufactures many products, it is felt that no more than 21,000 hours of labor time per year can be devoted to production of the new jackets. b. An investment of €900,000 will be necessary to carry inventories and accounts receivable and to purchase some new equipment. The company desires a 25% ROI in new product lines. c. Manufacturing overhead costs are allocated to products on the basis of direct labor- hours. Answer the following questions: а. What is the maximum number of jackets the company can produce each year? b. What is the markup percentage required to achieve the company's desired 25% ROI under the following: (i) absorption costing (ii) contribution costing
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Euclid Fashions, Inc. has designed a sport jacket that is about to be introduced on the market. A
Transcribed Image Text:Euclid Fashions, Inc. has designed a sport jacket that is about to be introduced on the
market. A standard cost card has been prepared for the new jacket, as shown below:
Standard
Standard price
quantity of
hours
Standard
or rate
€4.60 per metre
10.00 per hour
12.00 per hour
unit cost
Direct materials
2.0 metres
€ 9.20
Direct labour
1.4 hours
14.00
1.4 hours
Manufacturing overhead (1/6
variable)
Total standard cost per jacket
16.80
€40.00
The following additional information relating to the new jacket is available:
The only variable selling, general and administrative costs on the jacket will be €4 per
jacket for shipping. Fixed selling, general, and administrative costs will be (per year)
€ 90,000
384.000
€ 474,000
Salaries
Advertising and other
Total
a. Since the company manufactures many products, it is felt that no more than 21,000
hours of labor time per year can be devoted to production of the new jackets.
b. An investment of €900,000 will be necessary to carry inventories and accounts
receivable and to purchase some new equipment. The company desires a 25% ROI in
new product lines.
c. Manufacturing overhead costs are allocated to products on the basis of direct labor-
hours.
Answer the following questions:
а.
What is the maximum number of jackets the company can produce each year?
b. What is the markup percentage required to achieve the company's desired 25% ROI
under the following:
(i) absorption costing
(ii) contribution costing
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