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Anderson Windows 100

Price: $2.50


Anderson Windows Inc. is in the process of setting a target price on its newly designed
tinted window. Cost data relating to the window at a budgeted volume of 4,000 units are
as follows.

Per Unit Total
Direct materials   100
Direct labor   70
Variable manufacturing overhead   20
Fixed manufacturing overhead   120,000
Variable selling and administrative expenses   10
Fixed selling and administrative expenses   102,000

Anderson Windows uses cost-plus pricing methods that are designed to provide the company
with a 25% ROI on its tinted window line. A total of $1,016,000 in assets is committed to
production of the new tinted window.

Instructions
(a) Compute the markup percentage under absorption-cost pricing that will allow Anderson
Windows to realize its desired ROI.
(b) Compute the target price of the window under absorption-cost pricing, and show
proof that the desired ROI is realized.
(c) Compute the markup percentage under variable-cost pricing that will allow Anderson
Windows to realize its desired ROI. (Round to three decimal places.)
(d) Compute the target price of the window under variable-cost pricing, and show proof
that the desired ROI is realized.

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