6th Edition

ISBN: 9781264749225

Author: LANEN

Publisher: MCG CUSTOM

Concept explainers

Process costing is a sort of operation costing which is employed to determine the value of a product at each process or stage of producing process, applicable where goods produced from a series of continuous operations or procedure.

Job Costing

Job costing is adhesive costs of each and every job involved in the production processes. It is an accounting measure. It is a method which determines the cost of specific jobs, which are performed according to the consumer’s specifications. Job costing …

ABC Costing

Cost Accounting is a form of managerial accounting that helps the company in assessing the total variable cost so as to compute the cost of production. Cost accounting is generally used by the management so as to ensure better decision-making. In compari…

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Textbook Question

Chapter 1, Problem 39P

Cost Data for Managerial Purposes

Imperial Devices (ID) has offered to supply the state government with one model of its security screening device at “cost plus 20 percent.” ID operates a manufacturing plant that can produce 66,000 devices per year, but it normally produces 60,000. The costs to produce 60,000 devices follow:

Chapter 1, Problem 39P, Cost Data for Managerial Purposes Imperial Devices (ID) has offered to supply the state government , example 1

Based on these data, company management expects to receive $522 (= $435 × 120 percent) per monitor for those sold on this contract. After completing 500 monitors, the company sent a bill (invoice) to the government for $261,000 (= 500 monitors × $522 per monitor).

The president of the company received a call from a state auditor, who stated that the per

monitor cost should be:

Chapter 1, Problem 39P, Cost Data for Managerial Purposes Imperial Devices (ID) has offered to supply the state government , example 2

Therefore, the price per monitor should be $324 (= $270 × 120 percent). The state government ignored marketing costs because the contract bypassed the usual selling channels.

Required

What price would you recommend? Why? (Note: You need not limit yourself to the costs selected by the company or by the government auditor.)

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Chapter 1, Problem 38P

Chapter 1, Problem 40P

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