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Kearney, Inc., makes kitchen tools. Company management believes that a new model of coffee grinder would sell well at a price of $66. The company estimates unit materials costs to be $16 for the model, and overhead costs would average $18 per unit. The local wage rate for direct labor is $28 per hour. Kearney has a goal of earning an operating profit of 20 percent of manufacturing costs for each of its products. Required: What direct labor-hour input (hours per unit) could Kearney allow and still achieve its profit goal

Kearney, Inc., makes kitchen tools. Company management believes that a new model of coffee grinder would sell well at a price of $66. The company estimates unit materials costs to be $16 for the model, and overhead costs would average $18 per unit. The local wage rate for direct labor is $28 per hour. Kearney has a goal of earning an operating profit of 20 percent of manufacturing costs for each of its products. Required: What direct labor-hour input (hours per unit) could Kearney allow and still achieve its profit goal

FINANCIAL ACCOUNTING
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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Kearney, Inc., makes kitchen tools. Company management believes that a new model of coffee grinder would sell well at a price of $66. The company estimates unit materials costs to be $16 for the model, and overhead costs would average $18 per unit. The local wage rate for direct labor is $28 per hour. Kearney has a goal of earning an operating profit of 20 percent of manufacturing costs for each of its products.

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What direct labor-hour input (hours per unit) could Kearney allow and still achieve its profit goal?

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