HORNGRENS COST ACCOUNTING W/ACCESS
16th Edition
ISBN: 9781323687604
Author: Datar
Publisher: PEARSON
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Chapter 13, Problem 13.31P
Cost-plus and market-based pricing. Georgia Temps, a large labor contractor, supplies contract labor to building-construction companies. For 2017, Georgia Temps has budgeted to supply 84,000 hours of contract labor. Its variable costs are $13 per hour, and its fixed costs are $168,000. Roger Mason, the general manager, has proposed a cost-plus approach for pricing labor at full cost plus 20%.
- 1. Calculate the price per hour that Georgia Temps should charge based on Mason’s proposal.
- 2. The marketing manager supplies the following information on demand levels at different prices:
Price per Hour | Demand (Hours) |
$16 | 124,000 |
17 | 104,000 |
18 | 84,000 |
19 | 74,000 |
20 | 61,000 |
Georgia Temps can meet any of these demand levels. Fixed costs will remain unchanged for all the demand levels. On the basis of this additional information, calculate the price per hour that Georgia Temps should charge to maximize operating income.
- 3. Comment on your answers to requirements 1 and 2. Why are they the same or different?
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Cost-plus and market-based pricing. Georgia Temps, a large labor contractor, supplies contract labor to building-construction companies. For 2017, Georgia Temps has budgeted to supply 84,000 hours of contract labor. Its variable costs are $13 per hour, and its fixed costs are $168,000. Roger Mason, the general manager, has proposed a cost-plus approach for pricing labor at full cost plus 20%.
Johnson Marine has the following costs and expected sales for the coming year. Johnson is considering a number of different methods to determine the price of its product.
Total Costs
Variable Manufacturing
$
2,357,500
Variable Selling and Administrative
757,500
Plant-level Fixed Overhead
1,215,000
Fixed Selling and Administrative
607,500
Batch-level Fixed Overhead
207,500
Total Investment in Product Line
10,022,500
Expected Sales (units)
21,500
If Johnson determines price using a 48% markup of full manufacturing cost, the price is:
A new product is being designed by an engineering team at Golem Security. Several managers and employees from the cost accounting department and the marketing department are also on the team to evaluate the product and determine the cost using a target costing methodology. An analysis of similar products on the market suggests a price of $132.00 per unit. The company requires a profit of 0.20 of selling price. How much is the target cost per unit?
Round to two decimal places.
Chapter 13 Solutions
HORNGRENS COST ACCOUNTING W/ACCESS
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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