More Parts Liquidators specializes in buying excess parts inventories for resale or to incorporate into other products. They recently purchased parts for $190,000 and they have a buyer willing to pay $228,000. The company can also incorporate these parts into a new product at a cost of $142,500 and sell the new product for $361,000. What should More Parts Liquidators do? Parts Only New Product w/Parts Incremental Sales Revenue Cost of Parts Additional Costs Profit / loss More Parts should

More Parts Liquidators specializes in buying excess parts inventories for resale or to incorporate into other products. They recently purchased parts for $190,000 and they have a buyer willing to pay $228,000. The company can also incorporate these parts into a new product at a cost of $142,500 and sell the new product for $361,000. What should More Parts Liquidators do? Parts Only New Product w/Parts Incremental Sales Revenue Cost of Parts Additional Costs Profit / loss More Parts should

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter18: Pricing And Profitability Analysis

Section: Chapter Questions

Problem 14E: Many different businesses employ markup on cost to arrive at a price. For each of the following...

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Many different businesses employ markup on cost to arrive at a price. For each of the following situations, explain what the markup covers and why it is the amount that it is. a. Department stores have a markup of 100 percent of purchase cost. b. Jewelry stores charge anywhere from 100 percent to 300 percent of the cost of the jewelry. (The 300 percent markup is referred to as keystone.) c. Johnson Construction Company charges 12 percent on direct materials, direct labor, and subcontracting costs. d. Hamilton Auto Repair charges customers for direct materials and direct labor. Customers are charged 45 per direct labor hour worked on their job; however, the employees actually cost Hamilton 15 per hour.
A music store sells new instruments. The store also sells used instruments for people who are willing to give the store part of the sales price. The sales of used instruments, called commissions, amount to about one-fourth of total sales. On the firms classified income statement under the Revenue heading are both New Instrument Sales and Sales Commissions. Comment on this practice.
Cobe Company has manufactured 255 partially finished cabinets at a cost of $63,750. These can be sold as is for $76,500. Instead, the cabinets can be stained and fitted with hardware to make finished cabinets. Further processing costs would be $15,300, and the finished cabinets could be sold for $102,000. (a) Prepare a sell as is or process further analysis of income effects. (b) Should the cabinets be sold as is or processed further and then sold? (a) Sell or Process Analysis Sell As Is Process Further Revenue Costs Income Incremental income (loss) to process further (b) The company should:
suppose you are the purchasing manager for a company that manufactures scanners and other computer peripherals. Your vendor for scanner motors is now offe Quantity 1-500 motors 501-1,000 motors 1,001-2,000 motors Net Price 501-1,000 motors. 1,001-2,000 motors $16 16 16 Rebate Shipping none ✓ $1.30 1.90 $1.40 1.00 (a) Calculate the cost of the motors, including shipping charges, for each category (in $). 1-500 motors $ 17.40 $15.70 $14.80 0.70
Customer profitability in a manufacturing firm. Mississippi Manufacturing makes a component called B2040. This component is manufactured only when ordered by a customer, so Mississippi keeps no inventory of B2040. The list price is $112 per unit, but customers who place “large” orders receive a 10% discount on price. The customers are manufacturing firms. Currently, the salespeople decide whether an order is large enough to qualify for the discount. When the product is finished, it is packed in cases of 10. If the component needs to be exchanged or repaired, customers can come back within 14 days for free exchange or repair. The full cost of manufacturing a unit of B2040 is $95. In addition, Mississippi incurs customer-level costs. Customer-level cost-driver rates are:
Cobe Company has manufactured 230 partially finished cabinets at a cost of $57,500. These can be sold as is for $69,000. Instead, the cabinets can be stained and fitted with hardware to make finished cabinets. Further processing costs would be $13,800, and the finished cabinets could be sold for $92,000. (a) Prepare a sell as is or process further analysis of income effects. (b) Should the cabinets be sold as is or processed further and then sold? (a) Sell or Process Analysis Revenue Costs Income Incremental income (loss) to process further (b) The company should: Sell As Is Process Further
Cobe Company has manufactured 225 partially finished cabinets at a cost of $56,250. These can be sold as is for $67,500. Instead, the cabinets can be stained and fitted with hardware to make finished cabinets. Further processing costs would be $13,500, and the finished cabinets could be sold for $90,000.(a) Prepare a sell as is or process further analysis of income effects.(b) Should the cabinets be sold as is or processed further and then sold?
Finn Enterprises manufactures ceiling fans that normally sell for $92 each. There are 320 defective fans in inventory, which cost $60 each to manufacture. These defective units can be sold as is for $20 each, or they can be processed further for a cost of $42 each and then sold for the normal selling price. Stooge Enterprises would be better off by a OA $23,040 not increase in operating income if the ceiling fans are repaired. OB. $9.600 net increase in operating income if the ceiling fans are repaired OC. $23,040 net increase in operating income if the ceiling fans are sold as is OD. $9,600 net increase in operating income if the ceiling fans are sold as is.
Lockrite Security Company manufacturers home alarms. Currently, it is manufacturing one of its components at a total cost of $40, which includes fixed costs of $13 per unit. An outside provider of this component has offered to sell Lockrite the component for $29. Provide a differential analysis of the outside purchase proposal. If an amount is zero, enter "0". For those boxes in which you must enter subtracted or negative numbers use a minus sign. Differential Analysis Make Component (Alternative 1) or Buy Component (Alternative 2) MakeComponent(Alternative 1) BuyComponent(Alternative 2) DifferentialEffects(Alternative 2) Unit costs: Purchase price Variable costs Fixed costs Total unit costs $
Homoward Hardware buys cat liter for $6 less 20% per bag. The store's overhead is 45% of cost and the owner requires a profit of 20% of cost (a) (b) (c) (d) (e) (7) For how much should the bags be sold? What is the amount of markup included in the selling price? What is the rate of markup based on selling price? What is the rate of markup based on cost? What is the break-even price? What operating profit or loss is made if a bag is sold for $7 509
A company is providing its product to the consumer through the wholesalers. The managing director of the company thinks that if the company starts selling through retailers or to the consumers directly, it can increase its sales, charge higher prices and make more profit. On the basis of the following information and consider variable cost is rial 2.50 per unit and fixed cost is rial 50000. (a) Advise the managing director whether the company should change its channel of distribution or not (with calculation and Justification). (b) Provide suggestions and recommendations on the basis of analysis.
If e. procurement sells more than 10,000 packages, Wang receives an additional $8 for each package sold beyond the 10,000 level. Q.1. What is the unit cost to ECG of Wang’s software code included in its e. procurement package if it sells (a) 2,000 packages, (b) 6,000 packages, (c) 10,000 packages, and (d) 20,000 packages? Comment on the results. Q.2. To predict ECG’s total cost of using Wang’s software code in e.procurement, which unit cost (if any) of (a) to (d) in requirement one would you recommend ECG use? Explain.