Gerber Clothing Inc. has designed a rain suit for outdoor enthusiasts that is about to be...
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Gerber Clothing Inc. has designed a rain suit for outdoor enthusiasts that is about to be introduced on the market. A standard cost card has been prepared for the new suit, as follows: Standard Quantity or hours Standard price or Rate Standard Direct materials Direct labour 2.2 metres 1.0 hours $15 per metre 33 per hour Cost $33.00 33.00 Manufacturing overhead (1/6 variable) 1.0 hours 21 per hour Total standard cost per suit 21.00 $87.00 a. The only variable selling and administrative costs will be $6 per suit for shipping. Fixed selling and administrative costs will be as follows (per year): Salaries Advertising and other. Total $ 35,400 157,000 $192,400 b. Since the company manufactures many products, it is felt that no more than 10,500 hours of labour time per year can be devoted to production of the new suits. c. An investment of $550,000 will be necessary to carry inventories and accounts receivable and to purchase some new equipment. The company wants a 20% ROI in new product lines. c-1. Assume that the company is able to sell all of the rain suits that it can produce. Prepare an income statement for the first year of d. Manufacturing overhead costs are allocated to products on the basis of direct labour-hours activity. Sales Less cost of goods sold Gross margin Less selling, general, and administrative expenses: Shipping Salaries Advertising and other Total selling, general, and administrative expense Operating income c-2. Compute the company's ROI for the year on the suits, using the ROI formula. (Do not round intermediate calculations.) ROI 2. Repeat requirements 1a and 1b above, assuming that the company uses the total variable costing approach to cost-plus pricing. (Do not round intermediate calculations. Round your answers to 2 decimal places.) Markup percentage for the total variable costing Target selling price Gerber Clothing Inc. has designed a rain suit for outdoor enthusiasts that is about to be introduced on the market. A standard cost card has been prepared for the new suit, as follows: Standard Quantity or hours Standard price or Rate Standard Direct materials Direct labour 2.2 metres 1.0 hours $15 per metre 33 per hour Cost $33.00 33.00 Manufacturing overhead (1/6 variable) 1.0 hours 21 per hour Total standard cost per suit 21.00 $87.00 a. The only variable selling and administrative costs will be $6 per suit for shipping. Fixed selling and administrative costs will be as follows (per year): Salaries Advertising and other. Total $ 35,400 157,000 $192,400 b. Since the company manufactures many products, it is felt that no more than 10,500 hours of labour time per year can be devoted to production of the new suits. c. An investment of $550,000 will be necessary to carry inventories and accounts receivable and to purchase some new equipment. The company wants a 20% ROI in new product lines. c-1. Assume that the company is able to sell all of the rain suits that it can produce. Prepare an income statement for the first year of d. Manufacturing overhead costs are allocated to products on the basis of direct labour-hours activity. Sales Less cost of goods sold Gross margin Less selling, general, and administrative expenses: Shipping Salaries Advertising and other Total selling, general, and administrative expense Operating income c-2. Compute the company's ROI for the year on the suits, using the ROI formula. (Do not round intermediate calculations.) ROI 2. Repeat requirements 1a and 1b above, assuming that the company uses the total variable costing approach to cost-plus pricing. (Do not round intermediate calculations. Round your answers to 2 decimal places.) Markup percentage for the total variable costing Target selling price
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Related Book For
Managerial Accounting
ISBN: 978-1259024900
9th canadian edition
Authors: Ray Garrison, Theresa Libby, Alan Webb
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