REVEL for Horngren's Cost Accounting: A Managerial Emphasis -- Access Card (16th Edition) (What's New in Accounting)
16th Edition
ISBN: 9780134789705
Author: Srikant M. Datar, Madhav V. Rajan
Publisher: PEARSON
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Textbook Question
Chapter 13, Problem 13.23E
Cost-plus, target pricing, working backward. KidsPlay, Inc., manufactures and sells table sets. In 2016, it reported the following:
| Units produced and sold | 3,000 |
| Investment | $3,000,000 |
| Markup percentage on full cost | 10% |
| Rate of |
15% |
| Variable cost per unit | $600 |
- 1. What was KidsPlay’s operating income in 2016? What was the full cost per unit? What was the selling price? What was the percentage markup on variable cost to achieve the selling price? What are the total fixed costs? Required
- 2. KidsPlay is considering increasing the annual spending on advertising by $200,000. The managers believe that the investment will translate into a 10% increase in unit sales. Should the company make the investment? Show your calculations.
- 3. Refer back to the original data. In 2017. KidsPlay believes that it will be able to sell only 2,700 units at the price calculated in requirement 1. Management has identified $185,000 in fixed cost that can be eliminated. If KidsPlay wants to maintain a 10% markup on full cost, what is the target variable cost per unit?
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KidsPlay, Inc., manufactures and sells table sets. In 2016, it reported the following:
Units produced and sold 3,000
Investment $3,000,000
Markup percentage on full cost 10%
Rate of return on investment 15%
Variable cost per unit $600
Q. What was KidsPlay’s operating income in 2016? What was the full cost per unit? What was the selling price? What was the percentage markup on variable cost to achieve the selling price? What are the total fixed costs?
TinRoof, Inc., manufactures and sells a do-it-
yourself storage shed kit. In 2016, it reported
the following: Units produced and sold
3,200 I Investment $2,400,00O I Markup
percentage on full cost 8% ' Rate of return on
investment 12% | Variable cost per unit $500
Required 1. What was TinRoof's operating
income in 2016? What was the full cost per
unit? What was the selling price? What was
the percentage markup on variable cost? 2.
TinRoof is considering increasing the annual
spending on advertising by $175,000. The
managers believe that the investment will
translate into a 10% increase in unit sales.
Should the company make the investment?
Show your calculations.
Wilderness Products, Incorporated, has designed a self-inflating sleeping pad for use by backpackers and campers. The following
information is available about the new product:
a. An investment of $1,350,000 will be necessary to carry inventories and accounts receivable and to purchase some new equipment
needed in the manufacturing process. The company's required rate of return is 24% on all investments.
b. A standard cost card has been prepared for the sleeping pad, as shown below:
Direct materials
Direct labor
Manufacturing overhead (20% variable)
Total standard cost per pad
Standard Quantity
or Hours
4.0 yards
2.4 hours
2.4 hours
Standard Price or Rate
$2.70 per yard
$8.00 per hour
$12.50 per hour
Standard Cost
$10.80
19.20
30.00
$ 60.00
c. The only variable selling and administrative expense will be a sales commission of $9 per pad. The fixed selling and administrative
expenses will be $732,000 per year.
d. Because the company manufactures many products, no more than 38,400 direct…
Chapter 13 Solutions
REVEL for Horngren's Cost Accounting: A Managerial Emphasis -- Access Card (16th Edition) (What's New in Accounting)
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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