Pricing issues

having to do with possibly target costing, cost plus pricing, time and material pricing and transfer pricing

Pricing Issues Name Part A Stone Company is considering introducing a new line of pagers, targeting the preteen population. Stone believes that if the pagers can be priced competitively at $80, approximately 150,000 units can be sold. The controller has determined that an investment in new equipment totaling $8,400,000 will be required. Stone requires a minimum rate of return of 16% on all investments. Required: Compute the target cost per unit of the pager. Part B Joey's Recording Studio rents studio time to musicians in 2-hour blocks. Each session includes the use of the studio facilities, a digital recording of the performance, and a professional music producer/mixer. Anticipated annual volume is 16,000 sessions. The company has invested $8,000,000 in the studio and expects a return on investment (ROI) of 15%. Budgeted costs for the coming year as follows: Per Session Total Direct materials $190 Direct labor $110 Variable overhead $85 Fixed overhead $3,300,000 Variable selling and administrative $75 Fixed selling and administrative $1,340,000 Required: (a) Determine the total cost per session (b) Determine the desired ROI per session. (c) Calculate the mark-up percentage on the total cost per session. (d) Calculate the target price per session. Part C Silver Spoon Service repairs commercial food preparation equipment. The following budgeted cost data is available for 2020: Time Material Charges Charges Costs to be Recovered: Technicians' wages and benefits $650,000 Parts manager's salary and benefits $192,000 Office manager's salary and benefits 130,000 Other overhead 580,000 888,000 Total budgeted costs $1,360,000 $1,080,000 Silver Spoon has budgeted for 40,000 hours of technician time during the coming year. It desires a $48 profit margin per hour of labor and a 75% profit margin on parts. Silver Spoon estimates the total invoice cost of parts and materials in 2020 will be $2,400,000. Required: 1. Compute the rate charged per hour of labor. 2. Compute the material loading charge. 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 parts costing $75,000. Compute the total estimated price for the repair job