This Website Has Been Moved to a New Link


Loading

P8-7A Gonzalez Corporation needs

Price: $2.50


Gonzalez Corporation needs to set a target price for its newly designed product
EverReady. The following data relate to this new product.

  Per Unit Total
Direct materials   20
Direct labor   40
Variable manufacturing overhead   10
Fixed manufacturing overhead   1,200,000
Variable selling and administrative expenses   5
Fixed selling and administrative expenses   1,120,000

The costs shown above are based on a budgeted volume of 80,000 units produced and sold
each year. Gonzalez uses cost-plus pricing methods to set its target selling price. Because some managers prefer absorption-cost pricing and others prefer variable-cost pricing, the
accounting department provides information under both approaches using a markup of
50% on absorption cost and a markup of 70% on variable cost.

Instructions
(a) Compute the target price for one unit of EverReady using absorption-cost pricing.
(b) Compute the target price for one unit of EverReady using variable-cost pricing

No comments:

Post a Comment