a)
Product pricing: Product pricing is the method used for fixing the price for the products sold or the services offered to the consumers.
Product cost pricing: Product cost pricing is a pricing technique which sums up the costs involved in the production of the product alone and the markup is added to the sum.
Total cost pricing: Total cost pricing is a pricing technique which sums up all the costs involved in the production of the product and the markup is added to the sum.
Total Variable Cost: Total variable cost refers to the costs involved in the production of the product.
Markup Percentage: The markup percentage is the percentage of additional costs added to the product cost to get the selling price of the product.
Selling Price: Selling price is calculated by summing up the product cost per unit and the per unit markup cost
To Determine: The desired profit of Company CD.
a)

Explanation of Solution
Desired Profit: Company CD aims at earning a profit of 15% of the total investment made of $1,500,000.
Calculate the desired profit of Company CD.
Hence, the desired profit of Company CD is $225,000.
b)
On the basis of product cost concept, for Company CD
- i. Cost per unit
- ii. Markup percentage
- iii. Selling price of flat panel displays
b)

Explanation of Solution
Product cost pricing: Product cost pricing is a pricing technique which sums up the costs involved in the production of the product alone and the markup is added to the sum.
i)
Calculate the cost per unit of flat panel display.
Variable Cost (1) | $1,000,000 |
Fixed Cost | $250,000 |
Total | $1,250,000 |
Divide by: Number of units | 5,000 |
Cost per unit | $250 |
Hence, the cost per unit of flat panel display is $250.
Working Note:
Calculate the variable cost.
ii)
Calculate the markup percentage of flat panel display.
Hence, the markup percentage of flat panel display is 44%,
iii)
Calculate the selling price per unit of flat panel display
Cost per unit | $250 |
Markup per unit
|
$110 |
Selling price per unit | $360 |
Hence, the selling price per unit of flat panel display is $360.
c)
On the basis of total cost concept, for Company CD
- i. Cost per unit
- ii. Markup percentage
- iii. Selling price of flat panel displays
c)

Explanation of Solution
Total cost pricing: Total cost pricing is a pricing technique which sums up all the costs involved in the production of the product and the markup is added to the sum.
i)
Calculate the cost per unit of flat panel display.
Variable Cost
|
$1,175,000 |
Fixed Cost
|
$400,000 |
Total | $1,575,000 |
Divide by: Number of units | 5,000 |
Cost per unit | $315 |
Hence, the cost per unit of flat panel display is $315.
ii)
Calculate the markup percentage of flat panel display (rounded).
Hence, the markup percentage of flat panel display, rounded o 2 places is 14.29%,
iii)
Calculate the selling price per unit of flat panel display
Cost per unit | $315 |
Markup per unit
|
$45 |
Selling price per unit | $360 |
Hence, the selling price per unit of flat panel display is $360.
d)
On the basis of variable cost concept, for Company CD
- i. Cost per unit
- ii. Markup percentage
- iii. Selling price of flat panel displays
d)

Explanation of Solution
Total Variable Cost: Total variable cost refers to the costs involved in the production of the product.
i)
Variable cost per unit of flat panel display is $235.
Total variable cost of flat panel display is $1,175,000
ii)
Calculate the markup percentage of flat panel display.
Hence, the markup percentage of flat panel display is 53.19%,
iii)
Calculate the selling price per unit of flat panel display
Cost per unit | $235 |
Markup per unit
|
$125 |
Selling price per unit | $360 |
Hence, the selling price per unit of flat panel display is $360.
e)
To Comment: On any other considerations that would influence the price of flat panel display.
e)

Explanation of Solution
Company CD should consider the following things before determining the price of flat panel display.
- The general price of flat panel displays in the market, the competitive price must be considered.
- The price should be revised in short run instead of fixing a price for long run.
f) i)
To Prepare: The differential analysis of Company CD, for the proposed offer to either accept or reject it.
f) i)

Explanation of Solution
Prepare the differential analysis for Company CD for the given alternatives.
Differential Analysis of Company CD | |||
Reject Order (Alt 1) or Accept Order (Alt 2) | |||
August 03 | |||
Reject Order (Alternative 1) | Accept Order (Alternative 1) | Differential Effect on income | |
Revenues | $0 | $180,000 | $180,000 |
Costs | |||
Variable |
$0 | (2) (-) $152,000 | (-) $152,000 |
Income (loss), per unit | $0 | $28,000 | $28,000 |
Table (1)
The differential analysis of Company CD shows a profit of $28,000 on accepting the offer, hence the offer should be accepted.
Working Note:
Calculate the variable manufacturing cost.
Want to see more full solutions like this?
Chapter 25 Solutions
Accounting
- Lina purchased a new car for use in her business during 2024. The auto was the only business asset she purchased during the year, and her business was extremely profitable. Calculate her maximum depreciation deductions (including §179 expense unless stated otherwise) for the automobile in 2024 and 2025 (Lina doesn't want to take bonus depreciation for 2024) in the following alternative scenarios (assuming half-year convention for all): (Use MACRS Table 1, Table 2, and Exhibit 10-10.) a. The vehicle cost $40,000, and business use is 100 percent (ignore §179 expense). Year Depreciation deduction 2024 2025arrow_forwardEvergreen Corporation (calendar-year-end) acquired the following assets during the current year: (Use MACRS Table 1 and Table 2.) Date Placed in Asset Machinery Service October 25 Original Basis $ 120,000 Computer equipment February 3 47,500 Used delivery truck* August 17 Furniture April 22 60,500 212,500 The delivery truck is not a luxury automobile. Note: Do not round intermediate calculations. Round your answers to the nearest whole dollar amount. a. What is the allowable depreciation on Evergreen's property in the current year, assuming Evergreen does not elect §179 expense and elects out of bonus depreciation?arrow_forwardAssume that TDW Corporation (calendar-year-end) has 2024 taxable income of $952,000 for purposes of computing the §179 expense. The company acquired the following assets during 2024: (Use MACRS Table 1, Table 2, Table 3, Table 4, and Table 5.) Asset Machinery Computer equipment Furniture Total Placed in Service September 12 February 10 April 2 Basis $ 2,270,250 263,325 880,425 $ 3,414,000 a. What is the maximum amount of §179 expense TDW may deduct for 2024? Maximum §179 expense deductiblearrow_forward
- helparrow_forwardIdentify and discuss at least 7 problems with the Jamaican tax system and then provide recommendations to alleviate the problems.arrow_forwardOn 17-Feb of year 1, Javier purchased a building, including the land it was on, to assemble his new equipment. The total cost of the purchase was $1,302,500; $295,000 was allocated to the basis of the land and the remaining $1,007,500 was allocated to the basis of the building. (Use MACRS Table 1, Table 2, Table 3, Table 4 and Table 5.) Note: Do not round intermediate calculations. Round your answers to the nearest whole dollar amount. d. Assume the building was purchased and placed in service on 17-Feb of year 1 and is residential property. Depreciation Expense Year 1 Year 2 $ 36,632 Year 3 $ 36,632arrow_forward
- On 17-Feb of year 1, Javier purchased a building, including the land it was on, to assemble his new equipment. The total cost of the purchase was $1,302,500; $295,000 was allocated to the basis of the land and the remaining $1,007,500 was allocated to the basis of the building. (Use MACRS Table 1, Table 2, Table 3, Table 4 and Table 5.) Note: Do not round intermediate calculations. Round your answers to the nearest whole dollar amount. a. Using MACRS, what is Javier's depreciation deduction on the building for years 1 through 3? Year 1 Depreciation Expense Year 2 Year 3arrow_forwardOn 17-Feb of year 1, Javier purchased a building, including the land it was on, to assemble his new equipment. The total cost of the purchase was $1,302,500; $295,000 was allocated to the basis of the land and the remaining $1,007,500 was allocated to the basis of the building. (Use MACRS Table 1, Table 2, Table 3, Table 4 and Table 5.) Note: Do not round intermediate calculations. Round your answers to the nearest whole dollar amount. c. Assume the building was purchased and placed in service on 22-Nov instead of 17-Feb. Using MACRS, what is Javier's depreciation deduction on the building for years 1 through 3? Year 1 Year 2 Year 3 Depreciation Deductionarrow_forward1) Evaluate the progress and challenges in achieving a single set of global accounting standards. 2) Discuss the benefits and drawbacks of globalization in accounting, providing relevant examples.arrow_forward
- Wanting to finalize a sale before year-end, on December 29, WR Outfitters sold to Bob a warehouse and the land for $140,000. Note: Do not round intermediate calculations. Round your final answers to the nearest whole dollar amount. a. What is Bob's basis in the warehouse and in the land if the appraised value of the warehouse was $100,750 and the appraised value of the land was $115,000? Bob's Basis Warehouse Landarrow_forwardOn 17-Feb of year 1, Javier purchased a building, including the land it was on, to assemble his new equipment. The total cost of the purchase was $1,302,500; $295,000 was allocated to the basis of the land and the remaining $1,007,500 was allocated to the basis of the building. (Use MACRS Table 1, Table 2, Table 3, Table 4 and Table 5.) Note: Do not round intermediate calculations. Round your answers to the nearest whole dollar amount. e. What would be the depreciation for 2024, 2025, and 2026 if the property were nonresidential property purchased and placed in service 17-Feb, 2007 (assume the same original basis)? Depreciation Year Expense 2024 2025 2026arrow_forwardWhat percentage of RBC’s total assets is held in investments (at October 31, 2020 and 2019)? refer to the 2020 financial statements and accompanying notes of Royal Bank of Canada (RBC). Note that RBC also holds a significant loan portfolio. What is the business reason for holding loans versus securities? Comment on how the investments are classified and presented on the balance sheet. What percentage of total interest income comes from securities (2020 and 2019)? Are there any other lines on the income statement or in OCI) relating to the securities? What percentage of net income (include any relevant OCI items) relates to securities (2020 versus 2019)? Calculate an approximate return on the investments in securities.arrow_forward
- Managerial AccountingAccountingISBN:9781337912020Author:Carl Warren, Ph.d. Cma William B. TaylerPublisher:South-Western College PubManagerial Accounting: The Cornerstone of Busines...AccountingISBN:9781337115773Author:Maryanne M. Mowen, Don R. Hansen, Dan L. HeitgerPublisher:Cengage LearningPrinciples of Cost AccountingAccountingISBN:9781305087408Author:Edward J. Vanderbeck, Maria R. MitchellPublisher:Cengage Learning
- Survey of Accounting (Accounting I)AccountingISBN:9781305961883Author:Carl WarrenPublisher:Cengage LearningPrinciples of Accounting Volume 2AccountingISBN:9781947172609Author:OpenStaxPublisher:OpenStax CollegeCornerstones of Cost Management (Cornerstones Ser...AccountingISBN:9781305970663Author:Don R. Hansen, Maryanne M. MowenPublisher:Cengage Learning




