Professional Documents
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Chapter 9
Chapter 9
Chapter 9
REVIEW 9-14
Labour cost ($210,000 5,000 hours)
Desired profit margin
Labour rate per hour
$42.00
18.00
$60.00
Billing:
Labour (1.5 hrs $60)
Material costs
Material handling ($80 50%)
Total
$90.00
80.00
40.00
$210.00
EXERCISE 9-18
(a)
(1) In this case the selling price would be $125 ($100 + [$100
25%]). The problem with the $125 is that it is unlikely that Mucky
Duck will be able to sell any All-Body suits at that price. Market
research seems to indicate that it will sell for only $110.
(2) One way that Mucky Duck might consider manufacturing the
All-Body swimsuit is if it has excess capacity and therefore
manufacturing the All-Body will not affect fixed costs. Thus if the
company can cover its variable costs it might want to sell at the
$110 level.
(b)
(c)
The highest acceptable cost would be the target cost. The target
cost is $88 as shown below:
Target cost = Market price/1.25
= $110/ 1.25
= $88
EXERCISE 9-30
(a) Minimum transfer price = ($35 $5) + ($90 $35) = $85
(b) By forcing a transfer price of $40 per unit, Quality Motors would
lose profits totalling $200,000.
Lost CM on outside sales ($90 $35)
Savings by making the unit ($80 $35)
Per unit loss
Number of units transferred
$55.00
45.00
10.00
20,000
$200,000
PROBLEM 9-39A
(a)
(b)
(c)
PROBLEM 9-60B
PROBLEM 9-64B
(a) Absorption-cost pricing:
Computation of unit manufacturing cost
Direct materials
Direct labour
Variable manufacturing overhead
Fixed manufacturing overhead ($180,000 3,000)
Unit manufacturing cost
$140
80
40
60
$320
$1,320,000
960,000
360,000
150,000
$210,000
Variable-cost pricing
Computation of unit variable cost
Direct materials
Direct labour
Variable manufacturing overhead
Variable selling and administration
Unit manufacturing cost
$140
80
40
20
$280
$1,320,000
840,000
480,000
270,000
$210,000