Exercise 12-12A (Static) How the allocation of fixed cost affects a pricing decision LO 12-3 Arrow Manufacturing Company expects to make 50,000 chairs during the Year 1 accounting period. The company made 3,000 chairs in January. Materials and labor costs for January were $36,000 and $48,000, respectively. Arrow produced 4,000 chairs in February. Material and labor costs for February were $48,000 and $60,000, respectively. The company paid the $480,000 annual rental fee on its manufacturing facility on January 1, Year 1. The rental fee is allocated based on the total estimated number of units to be produced during the year. Required Assuming that Arrow desires to sell its chairs for cost plus 40 percent of cost, what price should be charged for the chairs produced in January and February? Note: Round intermediate calculations and final answers to 2 decimal places.
Exercise 12-12A (Static) How the allocation of fixed cost affects a pricing decision LO 12-3 Arrow Manufacturing Company expects to make 50,000 chairs during the Year 1 accounting period. The company made 3,000 chairs in January. Materials and labor costs for January were $36,000 and $48,000, respectively. Arrow produced 4,000 chairs in February. Material and labor costs for February were $48,000 and $60,000, respectively. The company paid the $480,000 annual rental fee on its manufacturing facility on January 1, Year 1. The rental fee is allocated based on the total estimated number of units to be produced during the year. Required Assuming that Arrow desires to sell its chairs for cost plus 40 percent of cost, what price should be charged for the chairs produced in January and February? Note: Round intermediate calculations and final answers to 2 decimal places.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Exercise 12-12A (Static) How the allocation of fixed cost affects a pricing
decision LO 12-3
Arrow Manufacturing Company expects to make 50,000 chairs during the Year 1 accounting
period. The company made 3,000 chairs in January. Materials and labor costs for January were
$36,000 and $48,000, respectively. Arrow produced 4,000 chairs in February. Material and
labor costs for February were $48,000 and $60,000, respectively. The company paid the
$480,000 annual rental fee on its manufacturing facility on January 1, Year 1. The rental fee is
allocated based on the total estimated number of units to be produced during the year.
Required
Assuming that Arrow desires to sell its chairs for cost plus 40 percent of cost, what price should
be charged for the chairs produced in January and February?
Note: Round intermediate calculations and final answers to 2 decimal places.
Price per unit
January
February
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