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Euclid Fashions, Inc. has designed a sport jacket that is about to be introduced on the market. A standard cost card has been prepared for the new jacket, as shown below: Standard Standard price quantity of hours Standard or rate €4.60 per metre 10.00 per hour 12.00 per hour unit cost Direct materials 2.0 metres € 9.20 Direct labour 1.4 hours 14.00 1.4 hours Manufacturing overhead (1/6 variable) Total standard cost per jacket 16.80 €40.00 The following additional information relating to the new jacket is available: The only variable selling, general and administrative costs on the jacket will be €4 per jacket for shipping. Fixed selling, general, and administrative costs will be (per year) € 90,000 384.000 € 474,000 Salaries Advertising and other Total a. Since the company manufactures many products, it is felt that no more than 21,000 hours of labor time per year can be devoted to production of the new jackets. b. An investment of €900,000 will be necessary to carry inventories and accounts receivable and to purchase some new equipment. The company desires a 25% ROI in new product lines. c. Manufacturing overhead costs are allocated to products on the basis of direct labor- hours. Answer the following questions: а. What is the maximum number of jackets the company can produce each year? b. What is the markup percentage required to achieve the company's desired 25% ROI under the following: (i) absorption costing (ii) contribution costing

Euclid Fashions, Inc. has designed a sport jacket that is about to be introduced on the market. A standard cost card has been prepared for the new jacket, as shown below: Standard Standard price quantity of hours Standard or rate €4.60 per metre 10.00 per hour 12.00 per hour unit cost Direct materials 2.0 metres € 9.20 Direct labour 1.4 hours 14.00 1.4 hours Manufacturing overhead (1/6 variable) Total standard cost per jacket 16.80 €40.00 The following additional information relating to the new jacket is available: The only variable selling, general and administrative costs on the jacket will be €4 per jacket for shipping. Fixed selling, general, and administrative costs will be (per year) € 90,000 384.000 € 474,000 Salaries Advertising and other Total a. Since the company manufactures many products, it is felt that no more than 21,000 hours of labor time per year can be devoted to production of the new jackets. b. An investment of €900,000 will be necessary to carry inventories and accounts receivable and to purchase some new equipment. The company desires a 25% ROI in new product lines. c. Manufacturing overhead costs are allocated to products on the basis of direct labor- hours. Answer the following questions: а. What is the maximum number of jackets the company can produce each year? b. What is the markup percentage required to achieve the company's desired 25% ROI under the following: (i) absorption costing (ii) contribution costing

Cornerstones of Cost Management (Cornerstones Series)
Cornerstones of Cost Management (Cornerstones Series)
4th Edition
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Don R. Hansen, Maryanne M. Mowen
Chapter17: Activity Resource Usage Model And Tactical Decision Making
Section: Chapter Questions
Problem 18E: A company is considering a special order for 1,000 units to be priced at 8.90 (the normal price...
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Euclid Fashions, Inc. has designed a sport jacket that is about to be introduced on the market. A standard cost card has been prepared for the new jacket, as shown below: (see attached picture)

Euclid Fashions, Inc. has designed a sport jacket that is about to be introduced on the market. A standard cost card has been prepared for the new jacket, as shown below: Standard Standard price quantity of hours Standard or rate €4.60 per metre 10.00 per hour 12.00 per hour unit cost Direct materials 2.0 metres € 9.20 Direct labour 1.4 hours 14.00 1.4 hours Manufacturing overhead (1/6 variable) Total standard cost per jacket 16.80 €40.00 The following additional information relating to the new jacket is available: The only variable selling, general and administrative costs on the jacket will be €4 per jacket for shipping. Fixed selling, general, and administrative costs will be (per year) € 90,000 384.000 € 474,000 Salaries Advertising and other Total a. Since the company manufactures many products, it is felt that no more than 21,000 hours of labor time per year can be devoted to production of the new jackets. b. An investment of €900,000 will be necessary to carry inventories and accounts receivable and to purchase some new equipment. The company desires a 25% ROI in new product lines. c. Manufacturing overhead costs are allocated to products on the basis of direct labor- hours. Answer the following questions: а. What is the maximum number of jackets the company can produce each year? b. What is the markup percentage required to achieve the company's desired 25% ROI under the following: (i) absorption costing (ii) contribution costing
Transcribed Image Text:Euclid Fashions, Inc. has designed a sport jacket that is about to be introduced on the market. A standard cost card has been prepared for the new jacket, as shown below: Standard Standard price quantity of hours Standard or rate €4.60 per metre 10.00 per hour 12.00 per hour unit cost Direct materials 2.0 metres € 9.20 Direct labour 1.4 hours 14.00 1.4 hours Manufacturing overhead (1/6 variable) Total standard cost per jacket 16.80 €40.00 The following additional information relating to the new jacket is available: The only variable selling, general and administrative costs on the jacket will be €4 per jacket for shipping. Fixed selling, general, and administrative costs will be (per year) € 90,000 384.000 € 474,000 Salaries Advertising and other Total a. Since the company manufactures many products, it is felt that no more than 21,000 hours of labor time per year can be devoted to production of the new jackets. b. An investment of €900,000 will be necessary to carry inventories and accounts receivable and to purchase some new equipment. The company desires a 25% ROI in new product lines. c. Manufacturing overhead costs are allocated to products on the basis of direct labor- hours. Answer the following questions: а. What is the maximum number of jackets the company can produce each year? b. What is the markup percentage required to achieve the company's desired 25% ROI under the following: (i) absorption costing (ii) contribution costing
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