MANAGERIAL ACCOUNTING F/MGRS.
6th Edition
ISBN: 9781264100590
Author: Noreen
Publisher: RENT MCG
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Chapter 6A, Problem 6A.4E
To determine
Concept Introduction:
Target cost is the method of costing to identify the cost to be incurred to generate the desired net income. Under this method, the desired net income is subtracted from the expected revenue and target cost is calculated.
The target cost.
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4 a. Shimada Products Corporation of Japan is anxious to enter the electronic calculatormarket. Management believes that in order to be competitive in world markets, theprice of the electronic calculator that the company is developing cannot exceed $15.Shimada’s required rate of return is 12% on all investments. An investment of$5,000,000 would be required to purchase the equipment needed to produce the300,000 calculators that management believes can be sold each year at the $15 price.Required:Compute the target cost of one calculatorb. Poskey Corporation uses an activity-based costing system with three activity costpools. The company has provided the following data concerning its costs and itsactivity based costing system:Costs:Wages and salaries ............ $400,000Depreciation ...................... 160,000Utilities .............................. 100,000Total ................................... $660,000Distribution of resource consumption:Activity Cost PoolsAssembly Setting Up…
Target Costing
Shimada Products Corporation of Japan is anxious to enter the electronic calculator market. Management believes that in order to be competitive in world markets, the price of the electronic calculator that the company is developing cannot exceed $15. Shimada’s required rate of return is 12% on all investments. An investment of $5,000,000 would be required to purchase the equipment needed to produce the 300,000 calculators that management believes can be sold each year at the $15 price.
Required:
Compute the target cost of one calculator.
4.12 ugnso eniraer
ah ho Octagon Company is considering introducing a new video camera. Its selling price is
projected to be P1,000 per unit. Variable manufacturing costs are estimated to be P450 per unit
The company expects the annual fixed manufacturing costs for the new camera to be P3,500.00
per year if its annual sales do not exceed the current regular shift capacity of 12,000 cameras and
P6,000,000 otherwise. Sales commissions are paid at 5% of sales. The company also plans to
spend P1,000,000 per year on advertising.
exod 000,08
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Instructions:
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1. Determine the contribution margin per unit.
2. Determine the two break even points in terms of number of cameras sold month.
3. Suppose a market research survey indicates that a 10% reduction in the selling price wil
lead to a 20% increase in sales. Should the company reduce the price by 10%?
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Fobcoru coer bet pox
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