Horngren's Cost Accounting: A Managerial Emphasis (16th Edition)
16th Edition
ISBN: 9780134475585
Author: Srikant M. Datar, Madhav V. Rajan
Publisher: PEARSON
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Chapter 13, Problem 13.19E
Target prices, target costs, activity-based costing. Snappy Tiles is a small distributor of marble tiles. Snappy identifies its three major activities and cost pools as ordering, receiving and storage, and shipping, and it reports the following details for 2016:
For 2016, Snappy buys 250,000 marble tiles at an average cost of $3 per tile and sells them to retailers at an average price of $4 per tile. Assume Snappy has no fixed costs and no inventories.
- 1. Calculate Snappy’s operating income for 2016.
Required
- 2. For 2017, retailers are demanding a 5% discount off the 2016 price. Snappy’s suppliers are only willing to give a 4% discount. Snappy expects to sell the same quantity of marble tiles in 2017 as in 2016. If all other costs and cost-driver information remain the same, calculate Snappy’s operating income for 2017.
- 3. Suppose further that Snappy decides to make changes in its ordering and receiving-and-storing practices. By placing long-run orders with its key suppliers, Snappy expects to reduce the number of orders to 200 and the cost per order to $25 per order. By redesigning the layout of the warehouse and reconfiguring the crates in which the marble tiles are moved, Snappy expects to reduce the number of loads moved to 3,125 and the cost per load moved to $28. Will Snappy achieve its target operating income of $0.30 per tile in 2017? Show your calculations.
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Safe Sailing manufactures flotation vests in Kirra Beach, Gold Coast. Safe Sailing's contribution margin income statement for the month ended 31 December 2016 contains
E (Click the icon to view the cost information.)
Suppose Overtown wishes to buy 3 800 vests from Safe Sailing. Acceptance of the order won't increase Safe Sailing's variable marketing and administrative expenses. The
Cost information
vests. Overtown has offered $12.00 per vest, which is below the normal sale price of $20.
Requirements
Safe Sailing
Requirement 1. Identify each cost in the income statement as either relevant or irelevant to Safe Sailing's decision.
Income statement
Variable manufacturing expenses
for the month ended 31 December 2016
Sales in units
Sales revenue
Variable marketing and administrative expenses
41 000
$
820 000
Fixed manufacturing expenses
Variable expenses:
Fixed marketing and administrative expenses
Manufacturing
205 000
105 000
Requirement 2. Prepare an incremental analysis to determine…
Chapter 13 Solutions
Horngren's Cost Accounting: A Managerial Emphasis (16th Edition)
Ch. 13 - What are the three major influences on pricing...Ch. 13 - Relevant costs for pricing decisions are full...Ch. 13 - Describe four purposes of cost allocation.Ch. 13 - How is activity-based costing useful for pricing...Ch. 13 - Describe two alternative approaches to long-run...Ch. 13 - What is a target cost per unit?Ch. 13 - Describe value engineering and its role in target...Ch. 13 - Give two examples of a value-added cost and two...Ch. 13 - It is not important for a company to distinguish...Ch. 13 - Prob. 13.10Q
Ch. 13 - Describe three alternative cost-plus pricing...Ch. 13 - Give two examples in which the difference in the...Ch. 13 - What is life-cycle budgeting?Ch. 13 - What are three benefits of using a product...Ch. 13 - Prob. 13.15QCh. 13 - Which of the following statements regarding price...Ch. 13 - Value-added, non-value-added costs. The Magill...Ch. 13 - Target operating income, value-added costs,...Ch. 13 - Target prices, target costs, activity-based...Ch. 13 - Target costs, effect of product-design changes on...Ch. 13 - Target costs, effect of process-design changes on...Ch. 13 - Cost-plus target return on investment pricing....Ch. 13 - Cost-plus, target pricing, working backward....Ch. 13 - Life-cycle budgeting and costing. Arnold...Ch. 13 - Considerations other than cost in pricing...Ch. 13 - Cost-plus, target pricing, working backward. The...Ch. 13 - Value engineering, target pricing, and target...Ch. 13 - Target service costs, value engineering,...Ch. 13 - Cost-plus, target return on investment pricing....Ch. 13 - Cost-plus, time and materials, ethics. C S...Ch. 13 - Cost-plus and market-based pricing. Georgia Temps,...Ch. 13 - Cost-plus and market-based pricing. (CMA, adapted)...Ch. 13 - Life-cycle costing. Maximum Metal Recycling and...Ch. 13 - Airline pricing, considerations other than cost in...Ch. 13 - Prob. 13.35PCh. 13 - Ethics and pricing. Instyle Interior Designs has...Ch. 13 - Value engineering, target pricing, and locked-in...
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