B C D E F G 1 Pricing Issues Name 2 3 Part A 4 Stone Company is considering introducing a new line of pagers, targeting the preteen 5 population. Stone believes that if the pagers can be priced competitively at $80, 6 approximately 150,000 units can be sold. The controller has determined that an 7 investment in new equipment totaling $8,400,000 will be required. Stone requires a 8 minimum rate of return of 16% on all investments. 9 Required: 10 Compute the target cost per unit of the pager. 71.04 11 12 Part B 13 Joey's Recording Studio rents studio time to musicians in 2-hour blocks. Each session 14 includes the use of the studio facilities, a digital recording of the performance, and a 15 professional music producer/mixer. Anticipated annual volume is 16,000 sessions. The 16 company has invested $8,000,000 in the studio and expects a retum on investment (ROI) 17 of 15%. Budgeted costs for the coming year as follows: 18 Per Session Total Direct materials $190 20 Direct labor $110 21 Variable overhead $85 22 Fixed overhead $3,300,000 23 Variable selling and administrative $75 24 Fixed selling and administrative $1,340,000 25 26 27 Required: 28 (a) Determine the total cost per session 29 (b) Determine the desired ROI per session. 30 (c) Calculate the mark-up percentage on the total cost per session 31 (d) Calculate the target price per session. 32 19 A B D E F G 32 33 38 43 34 Part C 35 Silver Spoon Service repairs commercial food preparation equipment. The following 36 budgeted cost data is available for 2020: 37 Time Material Charges Charges 39 Costs to be Recovered: 40 Technicians' wages and benefits S650,000 41 Parts manager's salary and benefits $192,000 42 Office manager's salary and benefits 130,000 Other overhead 580,000 888,000 44 Total budgeted costs $1,360,000 $1,080,000 45 46 Silver Spoon has budgeted for 40,000 hours of technician time during the coming year. It 47 desires a $48 profit margin per hour of labor and a 75% profit margin on parts. Silver 48 Spoon estimates the total invoice cost of parts and materials in 2020 will be $2,400,000 49 Required: 50 1. Compute the total rate charged per hour of labor. 51 2. Compute the material loading charge. 52 3. Silver Spoon has received a request from Lime Corporation for an estimate to repair a commercial fryer. The company estimates that it would take 350 hours of labor and 54 parts costing $75,000. Compute the total estimated price for the repair job. 55 56 53 57 58