Hannon Company

Exercise 8-3

Hannon Company makes swimsuits and sells these suits directly to retailers. Although Hannon has a variety of suits, it does not make the All-Body suit used by highly skilled swimmers. The market research department believes that a strong market exists for this type of suit. The department indicates that the All-Body suit would sell for approximately $105. Given its experience, Hannon believes the All-Body suit would have the following manufacturing costs.

Assume that Hannon uses cost-plus pricing, setting the selling price 19% above its costs. What would be the price charged for the All-Body swimsuit?(Round answer to 2 decimal places, e.g. 10.50.)

Assume that Hannon uses target costing. What is the price that Hannon would charge the retailer for the All-Body swimsuit?

What is the highest acceptable manufacturing cost Hannon would be willing to incur to produce the All-Body swimsuit, if it desired a profit of $16 per unit? (Assume target costing.)

Exercise 8-5

Paige Corporation makes a mechanical stuffed alligator that sings the Martian national anthem. The following information is available for Paige Corporation's anticipated annual volume of 531,800 units.

The company has a desired ROI of 26%. It has invested assets of $26,530,000.

Compute the total cost per unit. (Round answer to 2 decimal places, e.g. 10.50.)

Exercise 8-7

Pargo Corporation produces industrial robots for high-precision manufacturing. The following information is given for Pargo Corporation.

The company has a desired ROI of 16%. It has invested assets of $73,805,825. It anticipates production of 3,412 units per year.

Compute the cost per unit of the fixed manufacturing overhead and the fixed selling and administrative expenses.

Compute the desired ROI per unit. (Round answer to 0 decimal places, e.g. 125.)

Compute the target selling price. (Round answer to 0 decimal places, e.g. 125.)

Exercise 8-9

Ignatenko’s Custom Electronics (ICE) sells and installs complete security, computer, audio, and video systems for homes. On newly constructed homes it provides bids using time-and-material pricing. The following budgeted cost data are available.

The company has budgeted for 6,490 hours of technician time during the coming year. It desires a $37.46 profit margin per hour of labor and a 100% profit on parts. It estimates the total invoice cost of parts and materials in 2014 will be $650,000.

Compute the rate charged per hour of labor. (Round answer to 2 decimal places, e.g. 10.50.)

Compute the material loading percentage. (Round answer to 2 decimal places, e.g. 10.50.)

ICE has just received a request for a bid from Buil Builders on a $1,155,000 new home. The company estimates that it would require 78 hours of labor and $37,000 of parts. Compute the total estimated bill. (Round answer to 2 decimal places, e.g. 10.50.)

Exercise 8-12

The Cycle Division of Ayala Company has the following per unit data related to its most recent cycle called Roadbuster.

Presently, the Cycle Division buys its body frames from an outside supplier. However Ayala has another division, FrameBody, that makes body frames for other cycle companies. The Cycle Division believes that FrameBody's product is suitable for its new Roadbuster cycle. Presently, FrameBody sells its frames for $360 per frame. The variable cost for FrameBody is $258. The Cycle Division is willing to pay $279 to purchase the frames from FrameBody.

Assume that FrameBody has excess capacity and is able to meet all of the Cycle Division's needs. If the Cycle Division buys 1,165 frames from FrameBody, determine the following:

Problem 8-1A

Dewitt Corporation needs to set a target price for its newly designed product M14–M16. The following data relate to this new product.

These costs are based on a budgeted volume of 80,000 units produced and sold each year. Dewitt uses cost-plus pricing methods to set its target selling price. The markup percentage on total unit cost is 29%.

Compute the total variable cost per unit, total fixed cost per unit, and total cost per unit for M14–M16.

Compute the desired ROI per unit for M14–M16. (Round answer to 2 decimal places, e.g. 10.50.)

Compute the target selling price for M14–M16. (Round answer to 2 decimal places, e.g. 10.50.)

Compute variable cost per unit, fixed cost per unit, and total cost per unit assuming that 59,200 M14–M16s are sold during the year. (Round answers to 2 decimal places, e.g. 10.50.)