Regular Company produces audio equipment, specifically headphones and speakers. A new CEO has just been hired...

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Regular Company produces audio equipment, specifically headphones and speakers. A new CEO has just been hired and announces a new policy that if a product cannot earn a markup of at least 25 percent, it will be dropped. The markup is computed as product gross profit divided by reported product cost. Manufacturing overhead for year 1 totaled $1,026,000. Overhead is allocated to products based on direct materials cost. Data for year 1 show the following: Sales revenue Direct materials Direct labor Required: Headphones $ 2,323,890 755,000 502,000 Speakers $ 2,212,440 955,000 262,000 a-1. Calculate the markup for both headphones and speakers. a-2. Based on the CFO's new policy, which of the two products should be dropped? b. Regardless of your answer in requirement (a), the CFO decides at the beginning of year 2 to drop the speakers from the product line. The company cost analyst estimates that overhead without the speaker line will be $655,000. The revenue and costs for headphones are expected to be the same as last year. What is the estimated markup for headphones in year 2? Complete this question by entering your answers in the tabs below. Req A1 Req A2 Req B Calculate the markup for both headphones and speakers. (Enter your answers as a percentage rounded to 1 decimal place (i.e., 32.1).) Headphones Speakers Markup % % Req A Req A2 > Regular Company produces audio equipment, specifically headphones and speakers. A new CEO has just been hired and announces a new policy that if a product cannot earn a markup of at least 25 percent, it will be dropped. The markup is computed as product gross profit divided by reported product cost. Manufacturing overhead for year 1 totaled $1,026,000. Overhead is allocated to products based on direct materials cost. Data for year 1 show the following: Sales revenue Direct materials Direct labor Required: Headphones $ 2,323,890 755,000 502,000 Speakers $ 2,212,440 955,000 262,000 a-1. Calculate the markup for both headphones and speakers. a-2. Based on the CFO's new policy, which of the two products should be dropped? b. Regardless of your answer in requirement (a), the CFO decides at the beginning of year 2 to drop the speakers from the product line. The company cost analyst estimates that overhead without the speaker line will be $655,000. The revenue and costs for headphones are expected to be the same as last year. What is the estimated markup for headphones in year 2? Complete this question by entering your answers in the tabs below. Req A1 Req A2 Req B Calculate the markup for both headphones and speakers. (Enter your answers as a percentage rounded to 1 decimal place (i.e., 32.1).) Headphones Speakers Markup % % Req A Req A2 >

Answer rating: 100% (QA)

a1 To calculate the markup for both headphones and speakers we need to divide the product gross profit by the reported product cost Gross profit for h... View the full answer