Materials Labor Overhead Requirements Fixed Manufacturing Overhead is $705,000 annually. $ 19.00 $ 36.00 $ 9.00 1. Assume that MFL uses absorption costing and uses master-budget utilization as the denominator level for calculating its fixed manufacturing overhead rate. Selling price is set at 110% of total manufacturing cost. Compute MFL's selling price. 2. Due to a lagging economy, sales are not as robust as MFL anticipated. Adding to the pressure on sales, Mr. John Rains, President of MFL, believes the stream of newcomers to the market are (1) using his patent-protected technology and (2) pricing their products at a loss. No change is made to the pricing model and budgeted sales and production for 2021 is 17,625 units. You are the CFO at MFL. Explain to Mr. Rains what affect this revised forecast will have in 2021. 3. Recompute the selling price using practical capacity as the denominator level of activity. How would this choice have affected MFL's position in the marketplace? Generally, how would this choice affect the production-volume variance? Requirement 1. Assume that MFL uses absorption costing and uses master-budget utilization as the denominator level for calculating its fixed manufacturing overhead rate. Selling price is set at 110% of total manufacturing cost. Compute MFL's selling price Begin by determining the formula to compute the selling price. Direct manufacturing labor cost per unit x Fixed manufacturing overhead Direct materials cost per unit x Percentage of manufacturing cost Fixed manufacturing overhead x Variable manufacturing cost per unit Manufacturing cost per unitx Percentage of manufacturing cost Manufacturing overhead cost per unit x Percentage of manufacturing cost
Materials Labor Overhead Requirements Fixed Manufacturing Overhead is $705,000 annually. $ 19.00 $ 36.00 $ 9.00 1. Assume that MFL uses absorption costing and uses master-budget utilization as the denominator level for calculating its fixed manufacturing overhead rate. Selling price is set at 110% of total manufacturing cost. Compute MFL's selling price. 2. Due to a lagging economy, sales are not as robust as MFL anticipated. Adding to the pressure on sales, Mr. John Rains, President of MFL, believes the stream of newcomers to the market are (1) using his patent-protected technology and (2) pricing their products at a loss. No change is made to the pricing model and budgeted sales and production for 2021 is 17,625 units. You are the CFO at MFL. Explain to Mr. Rains what affect this revised forecast will have in 2021. 3. Recompute the selling price using practical capacity as the denominator level of activity. How would this choice have affected MFL's position in the marketplace? Generally, how would this choice affect the production-volume variance? Requirement 1. Assume that MFL uses absorption costing and uses master-budget utilization as the denominator level for calculating its fixed manufacturing overhead rate. Selling price is set at 110% of total manufacturing cost. Compute MFL's selling price Begin by determining the formula to compute the selling price. Direct manufacturing labor cost per unit x Fixed manufacturing overhead Direct materials cost per unit x Percentage of manufacturing cost Fixed manufacturing overhead x Variable manufacturing cost per unit Manufacturing cost per unitx Percentage of manufacturing cost Manufacturing overhead cost per unit x Percentage of manufacturing cost
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Standard Costing
The standard cost system is the expected cost per unit product manufactured and it helps in estimating the deviations and controlling them as well as fixing the selling price of the product. For example, it helps to plan the cost for the coming year on the various expenses.
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Transcribed Image Text:Data table
Materials
Labor
Overhead
Requirements
Fixed Manufacturing Overhead is $705,000 annually.
$ 19.00
$36.00
$ 9.00
1. Assume that MFL uses absorption costing and uses master-budget utilization as the denominator level
for calculating its fixed manufacturing overhead rate. Selling price is set at 110% of total manufacturing
cost. Compute MFL's selling price.
2. Due to a lagging economy, sales are not as robust as MFL anticipated. Adding to the pressure on sales,
Mr. John Rains, President of MFL, believes the stream of newcomers to the market are (1) using his
patent-protected technology and (2) pricing their products at a loss. No change is made to the pricing
model and budgeted sales and production for 2021 is 17,625 units. You are the CFO at MFL. Explain to
Mr. Rains what affect this revised forecast will have in 2021.
3. Recompute the selling price using practical capacity as the denominator level of activity. How would this
choice have affected MFL's position in the marketplace? Generally, how would this choice affect the
production-volume variance?
Requirement 1. Assume that MFL uses absorption costing and uses master-budget utilization as the denominator level for calculating its fixed manufacturing overhead rate. Selling price is set at 110% of total manufacturing cost. Compute MFL's selling
price.
Begin by determining the formula compute the selling price.
Direct manufacturing labor cost per unit x Fixed manufacturing overhead
Direct materials cost per unit x Percentage of manufacturing cost
Fixed manufacturing overhead x Variable manufacturing cost per unit
Manufacturing cost per unit x Percentage of manufacturing cost
Manufacturing overhead cost per unit x Percentage of manufacturing cost
Transcribed Image Text:Mess Free Litter, Inc. (MFL) recently patented its new electronic and remote-controlled litter box. Research indicates that the scooping of the litter is the task most abhorred by cat owners. MFL's new product automatically "scoops" and fills the pan with fresh
litter from the reservoir. MFL has budgeted 23,500 units for production and sales in the first year of operation. Practical capacity is 58,750 units. Variable manufacturing costs per unit are as follows:
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