Horngren's Cost Accounting: A Managerial Emphasis (16th Edition)
16th Edition
ISBN: 9780134475585
Author: Srikant M. Datar, Madhav V. Rajan
Publisher: PEARSON
expand_more
expand_more
format_list_bulleted
Concept explainers
Videos
Textbook Question
Chapter 11, Problem 11.35P
Short-run pricing, capacity constraints. Fashion Fabrics makes pants from a special material. The fabric is special because of the way it fits many body types. The pants sell for $142. A well-known retail establishment has asked Fashion Fabrics to produce 3,000 shorts from the same fabric. The factory has unused capacity, so Barbara Brooks, the owner of Fashion Fabrics, calculates the cost of making a pair of shorts from the fabric. Costs for the pants and shorts are as follows:
| Pants | Shorts | |
| Fabric (6 yds. × $12; 3 yds. × $12) | $ 72 | 36 |
| Variable direct manufacturing labor | 20 | 10 |
| Variable manufacturing |
8 | 4 |
| Fixed |
15 | 9 |
| Total manufacturing cost | $115 | $59 |
- 1. Suppose Fashion Fabrics can acquire all the fabric that it needs. What is the minimum price the company should charge for the shorts?
- 2. Now suppose that the fabric is in short supply. Every yard of fabric Fashion Fabrics uses to make shorts will reduce the pants that it can make and sell. What is the minimum price the company should charge for the shorts?
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
Short-run pricing, capacity constraints. Fashion Fabrics makes pants from a special material. The fabric is special because of the way it ts many body types. The pants sell for $142. A well-known retail establishment has asked Fashion Fabrics to produce 3,000 shorts from the same fabric. The factory has unused capacity, so Barbara Brooks, the owner of Fashion Fabrics, calculates the cost of making a pair of shorts from the fabric. Costs for the pants and shorts are as follows:
Leno Company makes swimsuits and sells these suits directly to retailers. Although Leno has a variety of suits, it does not make the All-
Body suit used by highly skilled swimmers. The market research department believes that a strong market exists for this type of suit.
The department indicates that the All-Body suit would sell for approximately $100. Given its experience, Leno believes the All-Body
suit would have the following manufacturing costs.
Direct materials
Direct labor
Manufacturing overhead
Total costs
(a1)
Selling price $
eTextbook and Media
$29
Save for Later
29
Assume that Leno uses cost-plus pricing, setting the selling price 26% above its costs. What would be the price charged for the All-
Body swimsuit?
42
$100
Assistance Used
Attempts: 0 of 3 used
Submit Answer
Leno Company makes swimsuits and sells these suits directly to retailers. Although Leno has a variety of suits, it does not make the All-
Body suit used by highly skilled swimmers. The market research department believes that a strong market exists for this type of suit.
The department indicates that the All-Body suit would sell for approximately $100. Glven its experience, Leno believes the All-Body
suit would have the following manufacturing costs.
Direct materials
$29
Directlabor
27
Manufacturing overhead
44
Total costs
$100
Chapter 11 Solutions
Horngren's Cost Accounting: A Managerial Emphasis (16th Edition)
Ch. 11 - Prob. 11.1QCh. 11 - Define relevant costs. Why are historical costs...Ch. 11 - All future costs are relevant. Do you agree? Why?Ch. 11 - Distinguish between quantitative and qualitative...Ch. 11 - Describe two potential problems that should be...Ch. 11 - Variable costs are always relevant, and fixed...Ch. 11 - A component part should be purchased whenever the...Ch. 11 - Prob. 11.8QCh. 11 - Managers should always buy inventory in quantities...Ch. 11 - Management should always maximize sales of the...
Ch. 11 - Prob. 11.11QCh. 11 - Cost written off as depreciation on equipment...Ch. 11 - Managers will always choose the alternative that...Ch. 11 - Prob. 11.14QCh. 11 - Prob. 11.15QCh. 11 - Qualitative and quantitative factors. Which of the...Ch. 11 - Special order, opportunity cost. Chade Corp. is...Ch. 11 - Prob. 11.18MCQCh. 11 - Keep or drop a business segment. Lees Corp. is...Ch. 11 - Relevant costs. Ace Cleaning Service is...Ch. 11 - Disposal of assets. Answer the following...Ch. 11 - Relevant and irrelevant costs. Answer the...Ch. 11 - Multiple choice. (CPA) Choose the best answer. 1....Ch. 11 - Special order, activity-based costing. (CMA,...Ch. 11 - Make versus buy, activity-based costing. The...Ch. 11 - Inventory decision, opportunity costs. Best Trim,...Ch. 11 - Relevant costs, contribution margin, product...Ch. 11 - Selection of most profitable product. Body Image,...Ch. 11 - Theory of constraints, throughput margin, relevant...Ch. 11 - Closing and opening stores. Sanchez Corporation...Ch. 11 - Prob. 11.31ECh. 11 - Relevance of equipment costs. Janets Bakery is...Ch. 11 - Equipment upgrade versus replacement. (A. Spero,...Ch. 11 - Special order, short-run pricing. Diamond...Ch. 11 - Short-run pricing, capacity constraints. Fashion...Ch. 11 - International outsourcing. Riverside Clippers Corp...Ch. 11 - Relevant costs, opportunity costs. Gavin Martin,...Ch. 11 - Opportunity costs and relevant costs. Jason Wu...Ch. 11 - Opportunity costs. (H. Schaefer, adapted) The Wild...Ch. 11 - Make or buy, unknown level of volume. (A....Ch. 11 - Make versus buy, activity-based costing,...Ch. 11 - Prob. 11.42PCh. 11 - Product mix, special order. (N. Melumad, adapted)...Ch. 11 - Theory of constraints, throughput margin, and...Ch. 11 - Theory of constraints, contribution margin,...Ch. 11 - Closing down divisions. Ainsley Corporation has...Ch. 11 - Dropping a product line, selling more tours....Ch. 11 - Prob. 11.48PCh. 11 - Dropping a customer, activity-based costing,...Ch. 11 - Equipment replacement decisions and performance...
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Similar questions
- Winter Sports manufactures snowboards. Its cost of making 1,800 bindings is as follows in the data table. Suppose Livingston will sell bindings to Winter Sports for $14 each. Winter Sports would pay $1 per unit to transport the bindings to its manufacturing plant, where it would add its own logo at a cost of $0.60 per binding.arrow_forwardIf DF sells three Masoline for each Aldernite, how many doors of each type would it produce and sell? What would be the total contribution margin?arrow_forwardNovak manufactures pre-made scrapbook pages for scrapbookers who don't have time to create their own pages. The clients need only insert their pictures on the pages. It currently sells a child's scrapbook with pre-made pages for $52. Production costs are $22 variable and $10 fixed. The company is considering creating scrapbook kits instead to save labour costs. They are expecting to sell these kits for $44 each and save $9 in variable costs. Prepare an incremental analysis. (If an amount reduces the net income then enter with a negative sign preceding the number e.g. -45,000 or parenthesis, e.g. (45,000). While alternate approaches are possible, irrelevant fixed costs should be included in both options when solving this problem.) $ Kits $ $ Pre-made pages Should the company begin to sell kits or continue to sell pre-made scrapbooks? $ $ Incremental (revenue) and costsarrow_forward
- Veritas is a startup that makes running t-shirts using high-tech fabric. The company has the following cost structure: Total cost = $50,000 + ($25 x number of t-shirts) The amount $50,000 is the: O Cost of Direct Material Cost of Good Sold O Fixed Cost O Overhead Rate O Total Variable Costarrow_forwardSid's Skins makes a variety of covers for electronic organizers and portable music players. The company's designers have discovered a market for a new clear plastic covering with college logos for a popular music player. Market research indicates that a cover like this would sell well in the market priced at $22.50. Sid's desires an operating profit of 25 percent of costs. Required: What is the highest acceptable manufacturing cost for which Sid's would be willing to produce the cover? (Round your answer to 2 decimal places.)arrow_forwardSid's Skins makes a variety of covers for electronic organizers and portable music players. The company's designers have discovered a market for a new clear plastic covering with college logos for a popular music player. Market research indicates that a cover like this would sell well in the market priced at $17.00. Sid's desires an operating profit of 25 percent of costs. Required: What is the highest acceptable manufacturing cost for which Sid's would be willing to produce the cover?arrow_forward
- Sid's Skins makes a variety of covers for electronic organizers and portable music players. The company's designers have discovered a market for a new clear plastic covering with college logos for a popular music player. Market research indicates that a cover like this would sell well in the market priced at $22,00. Sid's desires an operating profit of 25 percent of costs. Required: What is the highest acceptable manufacturing cost for which Sid's would be willing to produce the cover? (Round your answer to 2 decimal places.) Highest acceptable manufacturing costs ________arrow_forwardIf DF sells three Masoline for each Aldernite, how much would production and contribution margin increase if the assembly department could get 780 more labor hours at $15 per hour?arrow_forwardIf DF sells three Masoline for each Aldernite, how much would production and contribution margin increase if the molding department could buy 9,000 more pounds of materials for $3 per pound?arrow_forward
- Coram Audio makes wireless headphones. Each pair of headphones comes with a travel case. Since its founding. Coram has manufactured its own travel cases. Recently, Holmur Travel Gear (HTG), a local outfitter that manufactures and sells backpacks, tent cases, and so on, contacted Coram and proposed that they produce the headphone travel cases. Based on management experience, Coram's cost per travel case is as follows (based on annual production of 40,000 units). Direct materials Direct labor Variable overhead Fixed overhead Total HTG has offered to sell the case to Coram for $39 each. The total order would amount to 40,000 travel cases per year. Coram's management decides that they will make the switch to HTG cases if Coram can save at least $12,000 per year. Accepting the offer would eliminate annual fixed overhead of $76,000. Required: a. Prepare a schedule that shows the total differential costs. b. Should Coram continue to make the travel cases or buy them from HTG? $ 10.00 21.20…arrow_forwardCoram Audio makes wireless headphones. Each pair of headphones comes with a travel case. Since its founding. Coram has manufactured its own travel cases. Recently, Holmur Travel Gear (HTG), a local outfitter that manufactures and sells backpacks, tent cases, and so on, contacted Coram and proposed that they produce the headphone travel cases. Based on management experience, Coram's cost per travel case is as follows (based on annual production of 42,800 units). Direct materials Direct labor Variable overhead Fixed overhead Total $ 10.00 21.20 6.40 4.70 $ 42.30 HTG has offered to sell the case to Coram for $39 each. The total order would amount to 42,800 travel cases per year. Coram's management decides that they will make the switch to HTG cases if Coram can save at least $13,400 per year. Accepting the offer would eliminate annual fixed overhead of $81,320. Required: a. Prepare a schedule that shows the total differential costs. b. Should Coram continue to make the travel cases or buy…arrow_forwardWhitmore Glassware makes a variety of drinking glasses and mugs. The company’s designers have discovered a market for a 16 ounce mug with college logos. Market research indicates that a mug like this would sell well in the market priced at $26. Whitmore only introduces a product if they can an operating profit of 30 percent of costs. Required: What is the highest acceptable manufacturing cost for which Whitmore would be willing to produce the mugs?arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Cornerstones of Cost Management (Cornerstones Ser...AccountingISBN:9781305970663Author:Don R. Hansen, Maryanne M. MowenPublisher:Cengage Learning
Cornerstones of Cost Management (Cornerstones Ser...
Accounting
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Cengage Learning
Cost Accounting - Definition, Purpose, Types, How it Works?; Author: WallStreetMojo;https://www.youtube.com/watch?v=AwrwUf8vYEY;License: Standard YouTube License, CC-BY