Question 5:IKIT company produces and sells recliner chairs. IKIT uses an absorptionproduct costing system, which means that both variable and fixedoverhead are included in the product cost. Cost estimates for a reclinerchair and expected production volume for next year are as follows:Per UnitTotal$40$20Direct materialsDirect labourVariable manufacturing overheadVariable selling and administrative expensesFixed selling and administrative expensesFixed manufacturing overheadExpected volume of production (units):$14$15$380,000$460,00042,000The company's owners expect to earn a rate of return (ROI) of 30% on theirinvested assets of $2,500,000.Required:a. IKIT currently uses the cost-plus pricing method. Compute the mark-uppercentage and target selling price that will allow IKIT to earn its desiredROI of 30% for next year..Click or tap here to enter text. Required:a. IKIT currently uses the cost-plus pricing method. Compute the mark-uppercentage and target selling price that will allow IKIT to earn its desiredROI of 30% for next year.Click or tap here to enter text.b. Based on a recent marketing research, the senior management has anoptimistic sales expectation of 50,000 units and predicts to earn a higherROI of 35%. Compute new mark-up percentage and new target selling pricethat will allow IKIT to earn its new desired ROI.Click or tap here to enter text.c. Another cost-based approach to pricing is called time and material pricing.Under this approach, two pricing rates are $et. Explain where this approach isused and identify the steps involved in time-and-material pricing. Also explainwhy this approach is used in some industries.Click or tap here to enter text.

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Description: Question 5:IKIT company produces and sells recliner chairs. IKIT uses an absorptionproduct costing system, which means that both variable and fixedoverhead are included in the product cost. Cost estimates for a reclinerchair and expected production

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IKIT company produces and sells recliner chairs. IKIT uses an absorption product costing system, which means that both variable and fixed overhead are included in the product cost. Cost estimates for a recliner chair and expected production volume for next year are as follows: Per Unit Total $40 $20 Direct materials Direct labour Variable manufacturing overhead Variable selling and administrative expenses Fixed selling and administrative expenses Fixed manufacturing overhead Expected volume of production (units): $14 $15 $380,000 $460,000 42,000 The company's owners expect to earn a rate of return (ROI) of 30% on their invested assets of $2,500,000. Required: a. IKIT currently uses the cost-plus pricing method. Compute the mark-up percentage and target selling price that will allow IKIT to earn its desired ROI of 30% for next year.

IKIT company produces and sells recliner chairs. IKIT uses an absorption product costing system, which means that both variable and fixed overhead are included in the product cost. Cost estimates for a recliner chair and expected production volume for next year are as follows: Per Unit Total $40 $20 Direct materials Direct labour Variable manufacturing overhead Variable selling and administrative expenses Fixed selling and administrative expenses Fixed manufacturing overhead Expected volume of production (units): $14 $15 $380,000 $460,000 42,000 The company's owners expect to earn a rate of return (ROI) of 30% on their invested assets of $2,500,000. Required: a. IKIT currently uses the cost-plus pricing method. Compute the mark-up percentage and target selling price that will allow IKIT to earn its desired ROI of 30% for next year.

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter6: Activity-based, Variable, And Absorption Costing

Section: Chapter Questions

Problem 5PB: Wrappers Tape makes two products: Simple and Removable. It estimates it will produce 369,991 units...

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