Financial And Managerial Accounting Ch 8 Flashcards

1
Q

Management of the Catering Company would like the Food Division to transfer 10,000 cans of its final product to the Restaurant Division for HK$30. The Food Division sells the product to customers for HK$70 per unit. The Food Division’s variable cost per unit is HK$35 and its fixed cost per unit is HK$10. If the Food Division has 10,000 units available capacity, what is the minimum transfer price the Food Division should accept?

a. HK$30
b. HK$35
c. HK$45
d. HK$70

A

Management of the Catering Company would like the Food Division to transfer 10,000 cans of its final product to the Restaurant Division for HK$30. The Food Division sells the product to customers for HK$70 per unit. The Food Division’s variable cost per unit is HK$35 and its fixed cost per unit is HK$10. If the Food Division has 10,000 units available capacity, what is the minimum transfer price the Food Division should accept?

b. HK$35

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2
Q

Fine Line Phones is considering introducing a fashion cover for its phones. Market research indicates that 200,000 units can be sold if the price is no more than $20. If Fine Line decides to produce the covers, it will need to invest $1,000,000 in new production equipment. Fine Line requires a minimum rate of return of 25% on all investments. Determine the target cost per unit for the cover.

A

Fine Line Phones is considering introducing a fashion cover for its phones. Market research indicates that 200,000 units can be sold if the price is no more than $20. If Fine Line decides to produce the covers, it will need to invest $1,000,000 in new production equipment. Fine Line requires a minimum rate of return of 25% on all investments. Determine the target cost per unit for the cover.

The desired profit for this new product line is $1,000,000 x 25% = $250,000

Each cover must result in profit of $250,000 ÷ 200,000 units = $1.25

target cost = market price ($20) - desired profit ($1.25) = $18.75 per unit

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3
Q

Target cost related to price and profit means that:

a. Cost and desired profit must be determined before selling price
b. Cost and selling price must be determined before desired profit.
c. Price and desired profit must be determined before costs
d. Costs can be achieved only if the company is at full capacity

A

Target cost related to price and profit means that:

c. Price and desired profit must be determined before costs

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4
Q

Cost-plus pricing means that:

a. Selling price = variable cost + (markup percentage + variable cost)
b. Selling price = cost + (markup percentage X cost)
c. Selling price = manufacturing cost + (markup percentage + manufacturing cost)
d. Selling price = fixed cost + (markup percentage X fixed cost)

A

Cost-plus pricing means that:

b. Selling price = cost + (markup percentage X cost)

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5
Q

Air Corporation produces air purifiers. The following per unit cost information is available: direct materials $16, direct labor $18, variable manufacturing overhead $11, variable selling and administrative expenses $6. Fixed selling and administrative expenses are $50,000, and fixed manufacturing overhead is $150,000. Using a 45% markup percentage on total per unit cost and assuming 10,000 units, compute the target selling price.

A

Air Corporation produces air purifiers. The following per unit cost information is available: direct materials $16, direct labor $18, variable manufacturing overhead $11, variable selling and administrative expenses $6. Fixed selling and administrative expenses are $50,000, and fixed manufacturing overhead is $150,000. Using a 45% markup percentage on total per unit cost and assuming 10,000 units, compute the target selling price.

Answer: 102,95$

Variable cost per unit: 16+18+11+6 = 51$

Fixed cost per unit: (50 000$ / 10000) + (150 000$ / 10000) = 20

Total costs per unit = 51 +20 = 71$

71 + 45% = 102,95

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6
Q

Crescent Electrical Repair has decided to price its work on a time-and-material basis. It estimates the following costs for the year related to labor.

Technician wages and benefits $100,000

Office employee’s salary/benefits $40,000

Other overhead $80,000

Crescent desires a profit margin of $10 per labor hour and budgets 5,000 hours of repair time for the year. The office employee’s salary, benefits, and other overhead costs should be divided evenly between time charges and material loading charges. Crescent labor charge per hour would be:

a. $42
b. $34
c. $32
d. $30

A

Crescent Electrical Repair has decided to price its work on a time-and-material basis. It estimates the following costs for the year related to labor.

Technician wages and benefits $100,000

Office employee’s salary/benefits $40,000

Other overhead $80,000

Crescent desires a profit margin of $10 per labor hour and budgets 5,000 hours of repair time for the year. The office employee’s salary, benefits, and other overhead costs should be divided evenly between time charges and material loading charges. Crescent labor charge per hour would be:

a. $42

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7
Q

Presented below are data for Harmon Electrical Repair Shop for next year. The desired profit margin per labor hour is $10. The material loading charge is 40% of invoice cost. Harmon estimates that 8,000 labor hours will be worked next year.

Repair technicians wages: $130 000

Fringe benefits: $30 000

Overhead: $20 000

If Harmon repairs a TV that takes 4 hours to repair and uses parts of $50, compute the bill for this job.

Job: repair TV

Labour charges:

Cost of parts and materials:

Material loading charge:

Total price of materials:

Total price of labour and material:

A

Presented below are data for Harmon Electrical Repair Shop for next year. The desired profit margin per labor hour is $10. The material loading charge is 40% of invoice cost. Harmon estimates that 8,000 labor hours will be worked next year.

Repair technicians wages: $130 000

Fringe benefits: $30 000

Overhead: $20 000

If Harmon repairs a TV that takes 4 hours to repair and uses parts of $50, compute the bill for this job.

Labour charge:

(130 000 / 8000) + (30 000 / 8000) + ( 20 000 / 8000) = $22,5

With desired profit of $10 = $22,5 + 10 = $32,5

Job: repair TV

Labour charges: 4h x $32,5 = 130

Cost of parts and materials: $50

Material loading charge: 50 x 40% = $20

Total price of materials: 50 + 20 = $70

Total price of labour and material: $200

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8
Q

The clock division of Control Central Corporation manufactures clocks and then sells them to customers for $10 per unit. Its variable cost is $4 per unit, and its fixed cost per unit is $2.50. Management would like the clock division to transfer 8,000 of these clocks to another division within the company at a price of $5. The clock division could avoid $0.50 per clock of variable packaging costs by selling internally. Determine the minimum transfer price, assuming

a) the clock division is not operating at full capacity
b) the clock division is operating at full capacity

A

The clock division of Control Central Corporation manufactures clocks and then sells them to customers for $10 per unit. Its variable cost is $4 per unit, and its fixed cost per unit is $2.50. Management would like the clock division to transfer 8,000 of these clocks to another division within the company at a price of $5. The clock division could avoid $0.50 per clock of variable packaging costs by selling internally. Determine the minimum transfer price, assuming

a) the clock division is not operating at full capacity.

Answer: 4 - 0.5 = $3.5

opportunity cost + variable cost = minimum transfer price

b) the clock division is operating at full capacity.

Answer: 10 - 0,5 = $9.5

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9
Q

Taan Classic Toys has examined the market for toy train locomotives. It belives there is a market niche in which it can sell locomotives at NT2400 each. It estimates that it could sell 10 000 of these locomotives annually. Variable costs to make locomotive are expected to be NT750. Taan anticipates a profit of of NT450 per locomotive. The target cost for the locomotive is:

a. NT2400
b. NT1950
c. NT1200
d. NT750

A

Taan Classic Toys has examined the market for toy train locomotives. It belives there is a market niche in which it can sell locomotives at NT2400 each. It estimates that it could sell 10 000 of these locomotives annually. Variable costs to make locomotive are expected to be NT750. Taan anticipates a profit of of NT450 per locomotive. The target cost for the locomotive is:

b. NT1950

The target cost for selling the locomotive is selling price less desired profit (2400 - 450) = NT1950

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10
Q

In a competitive, common-prodcut environment, a seller would most likely use:

a. time-and-material pricing
b. variable costing
c. target costing
d. cost-plus pricing

A

In a competitive, common-prodcut environment, a seller would most likely use:

c. target costing

A seller would most likely use target costing in a competitive common-product environment as the price is set by the market. In a less competitive environment, companies have a greter ability to set the product price and therefore could use other methods.

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11
Q

Choi Ltd. is considering developing a new product. The company has gathered the following information on this product:

Expected total unit cost: 25 000 yen

Estimated investment for new product: 500 000 000 yen

Desired ROI: 10%

Expected number of units to be produced and sold: 1000

Given this information, the desired markup percentage and selling price are:

a. markup percentage 10%, selling price 55 000 yen
b. markup percentage 200%, selling price 75 000 yen
c. markup percentage 10%, selling price 50 000 yen
d. markup percentage 100%, selling price 55 000 yen

A

Choi Ltd. is considering developing a new product. The company has gathered the following information on this product:

Expected total unit cost: 25 000 yen

Estimated investment for new product: 500 000 000 yen

Desired ROI: 10%

Expected number of units to be produced and sold: 1000

Given this information, the desired markup percentage and selling price are:

b. markup percentage 200%, selling price 75 000 yen

The desired markup percentage: ((10% x 500 000 000) / 1000) / 25000 = 200%

The selling price: 25000 + 50000 = 75 000 yen

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12
Q

Limawan Tools provides the following information for the new product it recently introduced:

Total unit cost: 300 000 Rp

Desired ROI per unit: 100 00 Rp

Target selling price: 400 000 Rp

What would be Limawan’s percentage markup on cost?

a. 125%
b. 75%
c. 33 1/3%
d. 25%

A

Limawan Tools provides the following information for the new product it recently introduced:

Total unit cost: 300 000 Rp

Desired ROI per unit: 100 00 Rp

Target selling price: 400 000 Rp

What would be Limawan’s percentage markup on cost?

c. 33 1/3%

100 000 / 300 00 = 33 1/3%

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13
Q

Kikubhai Electrical Repair has decided to price its workon a time-and-material basis. It estimates the following costs for the year related to labour.

Technician wages and benefits: 5 000 000 Rs

Office employee’s salary and benefits: 2 000 000 Rs

Other overhead: 4 000 000 Rs

Kikubhai desires a profit margin of 500 Rs per labor hour and budgets 5000 hours of repair time for the year. The office employee’s salary, benefits, and other overhead costs should be divided evenly between time charges and material loading charges. Kikubhai labor charge per hour would be:

a. 2100 Rs
b. 1700 Rs
c. 1600 Rs
d. 1500 Rs

A

Kikubhai Electrical Repair has decided to price its workon a time-and-material basis. It estimates the following costs for the year related to labour.

Technician wages and benefits: 5 000 000 Rs

Office employee’s salary and benefits: 2 000 000 Rs

Other overhead: 4 000 000 Rs

Kikubhai desires a profit margin of 500 Rs per labor hour and budgets 5000 hours of repair time for the year. The office employee’s salary, benefits, and other overhead costs should be divided evenly between time charges and material loading charges. Kikubhai labor charge per hour would be:

a. 2100 Rs

5 000 000 / 5000 = 1000

(2 000 000 / 5000) x 0,5 = 200

(4 000 000 / 5000) x 0,5 = 400

1000 + 200 + 400 + 500 = 2100 Rs

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14
Q

Time-and-material pricing would most likely be used by a:

a. garden-fertilizer producer
b. lawn-mower manufacturer
c. tree farm
d. lawn-care provider

A

Time-and-material pricing would most likely be used by a:

d. lawn-care provider

A lawn-care provider would be most likely to use time-and-material pricing as it is a service company.

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15
Q

When a company uses time-and-material pricing, the material loading charge is expressed as a percentage of:

a. the total estimated labor costs for the year
b. the total estimated costs of parts and materials for the year
c. the total estimated overhead costs for the year
d. the total estimated costs of parts, materials, and labor fof the year

A

When a company uses time-and-material pricing, the material loading charge is expressed as a percentage of:

b. the total estimated costs of parts and materials for the year

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16
Q

The Plastics Division of Weston Ltd. manufactures plastic molds and then sells them to customers for 70 USD per unit. Its variable cost is 30 USD per unit and its fixed cost per unit is 10 USD. Managment would like the Plastics Division to transfer 10 000 of these molds to another division within the company at a price of 40 USD. The Plastics Divison is operating at full capacity. What is the minimum transfer price the Plastic Division should accept?

a. 10 USD
b. 30 USD
c. 40 USD
d. 70 USD

A

The Plastics Division of Weston Ltd. manufactures plastic molds and then sells them to customers for 70 USD per unit. Its variable cost is 30 USD per unit and its fixed cost per unit is 10 USD. Managment would like the Plastics Division to transfer 10 000 of these molds to another division within the company at a price of 40 USD. The Plastics Divison is operating at full capacity. What is the minimum transfer price the Plastic Division should accept?

d. 70 USD

The minimum transfer price the Plastics Dvision should accept = variable cost per unit + opportunity cost per unit. Since the Plastics Dvision is operating at full capacity, the opportunity cost per unit is equal to the contribution margin per unit of 40 USD (selling price - variable cost). The minimum transfer price therefore is 30 + 40 = 70 USD

17
Q

The Plastics Division of Weston Ltd. manufactures plastic molds and then sells them to customers for 70 USD per unit. Its variable cost is 30 USD per unit and its fixed cost per unit is 10 USD. Managment would like the Plastics Division to transfer 10 000 of these molds to another division within the company at a price of 40 USD. The Plastics Divison has available capacity for 10 000 units. What is the minimum transfer price the Plastic Division should accept?

a. 10 USD
b. 30 USD
c. 40 USD
d. 70 USD

A

The Plastics Division of Weston Ltd. manufactures plastic molds and then sells them to customers for 70 USD per unit. Its variable cost is 30 USD per unit and its fixed cost per unit is 10 USD. Managment would like the Plastics Division to transfer 10 000 of these molds to another division within the company at a price of 40 USD. The Plastics Divison has available capacity for 10 000 units. What is the minimum transfer price the Plastic Division should accept?

b. 30 USD

Since Plastics Division has excess capacity of 10 000 units, the minimum transfer price is equal to variable costs per unit of 30 USD.

18
Q

The most common method to establish transfer prices is the:

a. negotiated transfer pricing approach
b. opportunity costing transfer pricing approach
c. cost-based transfer pricing approach
d. market-based transfer pricing approach

A

The most common method to establish transfer prices is the:

c. cost-based transfer pricing approach

Cost-based transfer pricing approach is simple to use, easy to understand, and has available cost data. Negotiated transfer pricing and market-based transfer pricing are considered better approaches but often are not used because of lack of market price information of other considerations.

19
Q

AST Electrical provides the following cost information related to its production of electronic circuit boards.

Variable manufcaturing cost: 40 EUR per unit

Fixed manufacturing cost: 30 EUR per unit

Variable selling and admin expenses 8 EUR per unit

Fixed selling and admin expenses 12 EUR per unit

Desired ROI per unit: 15 EUR

What is its markup percentage assuming that AST Electrical uses absorpbtion-cost pricing?

a. 16,67%
b. 50%
c. 54,28%
d. 118,75%

A

AST Electrical provides the following cost information related to its production of electronic circuit boards.

Variable manufcaturing cost: 40 EUR per unit

Fixed manufacturing cost: 30 EUR per unit

Variable selling and admin expenses 8 EUR per unit

Fixed selling and admin expenses 12 EUR per unit

Desired ROI per unit: 15 EUR

What is its markup percentage assuming that AST Electrical uses absorpbtion-cost pricing?

b. 50%

Add the desired ROI per unit (15) and selling and admin expenses per unit (20) = 35 per unit, then divide that by the manufacturing cost per unit (70) which equals the markup percentage of 50%.

20
Q

AST Electrical provides the following cost information related to its production of electronic circuit boards.

Variable manufcaturing cost: 40 EUR per unit

Fixed manufacturing cost: 30 EUR per unit

Variable selling and admin expenses 8 EUR per unit

Fixed selling and admin expenses 12 EUR per unit

Desired ROI per unit: 15 EUR

What is its markup percentage assuming that AST Electrical uses variable-cost pricing?

a. 16,67%
b. 50%
c. 54,28%
d. 118,75%

A

AST Electrical provides the following cost information related to its production of electronic circuit boards.

Variable manufcaturing cost: 40 EUR per unit

Fixed manufacturing cost: 30 EUR per unit

Variable selling and admin expenses 8 EUR per unit

Fixed selling and admin expenses 12 EUR per unit

Desired ROI per unit: 15 EUR

What is its markup percentage assuming that AST Electrical uses variable-cost pricing?

d. 118,75%

Add the desired ROI per unit (15), fixed manufcaturing cost per unit (30) and fixed selling and administrative expenses per unit (12) = 57, then divide that by the total variable costs per unit (40 + 8) = 57 / 48 = 118,75%.

21
Q

A manager is setting the price of a product. He is considering either using a 12% sales margin or 15% cost mark-up method. What would the selling price be, if his cost of sales is £45? (Sales margin means that percentage is taken from sales price and cost mark-up means that percentage is taken from the cost of sales).

a. £50.40 margin or £51.75 mark-up
b. £51.14 margin or £52.94 mark-up
c. £50.40 margin or 52.94 mark-up
d. £51.14 margin or £51.75 mark-up

A

A manager is setting the price of a product. He is considering either using a 12% sales margin or 15% cost mark-up method. What would the selling price be, if his cost of sales is £45? (Sales margin means that percentage is taken from sales price and cost mark-up means that percentage is taken from the cost of sales).

d. £51.14 margin or £51.75 mark-up

45 / 0.88 = £51.14. 45 x 1.15 = £51.75

22
Q

A camera will be priced at £300. What will its target cost of sales need to be if the retailer takes a 40% sales margin and the manufacturer, a 30% sales margin? (Sales margin means that percentage is taken from sales price).

a. £90.00
b. £36.00
c. £126.00
d. £164.83

A

A camera will be priced at £300. What will its target cost of sales need to be if the retailer takes a 40% sales margin and the manufacturer, a 30% sales margin? (Sales margin means that percentage is taken from sales price).

c. £126.00

£300 x 0.6 x 0.7 = £126.

23
Q

Bond Co. is using the target cost approach on a new product. Information gathered so far reveals:

Expected annual sales: 400,000 units
Desired profit per unit: €0.35
Target cost: €168,000

What is the target selling price per unit in EURO CENTS?

A

Bond Co. is using the target cost approach on a new product. Information gathered so far reveals:

Expected annual sales: 400,000 units
Desired profit per unit: €0.35
Target cost: €168,000

What is the target selling price per unit in EURO CENTS?

Answer: 77 cents

168 000 / 400 000 = 0,42 (target cost per unit)

target cost (0,42) + desired profit (0,35) = 0,77 EUR = 77 cents

24
Q

Larry Cable plans to introduce a new product and is using the target cost approach. Projected sales revenue is €810,000 (€4.05 per unit) and target costs are €730,000. What is the desired profit per unit in EURO CENTS?

A

Larry Cable plans to introduce a new product and is using the target cost approach. Projected sales revenue is €810,000 (€4.05 per unit) and target costs are €730,000. What is the desired profit per unit in EURO CENTS?

Answer: 40 cents

Units sold: 810 000 / 4,05 = 200 000

Profit in total 810 000 - 730 000 = €80 000

Profit per unit: 80 000 / 200 000 = 0,4 EUR = 40 cents

25
Q

A drinks factory has spare capacity and is considering taking on a special order of 50,000 bottles. It usually charges 54 cents bottle to recover its overheads. If its variable costs are €6.80 and it will incur distribution costs of €300 for every 1,000 bottles, what is the minimum price it should charge?

a. €6.80
b. €7.34
c. €7.64
d. €7.10

A

A drinks factory has spare capacity and is considering taking on a special order of 50,000 bottles. It usually charges 54 cents bottle to recover its overheads. If its variable costs are €6.80 and it will incur distribution costs of €300 for every 1,000 bottles, what is the minimum price it should charge?

d. €7.10

Distribution cost: 50 000 / 1000 = 50 deliveries of 1000 bottles. 50 x 300 = 15 000 €.

Distribution cost per unit: 15 000 / 50 000 = 0,3 EUR

Variable costs + distribution costs = 6,8 + 0,3 = €7,10

26
Q

A company using cost-plus pricing has an ROI of 24%, total sales of 20,000 units and a desired ROI per unit of HK$30. What was the amount of investment?

a. HK$144,000
b. HK$2,500,000
c. HK$456,000
d. HK$789,475

A

A company using cost-plus pricing has an ROI of 24%, total sales of 20,000 units and a desired ROI per unit of HK$30. What was the amount of investment?

b. HK$2,500,000

Desired total profit: 20 000 x 30 = HK$600 000

Amount of investment: 600 000 / (24/100) = HK$2,500,000

27
Q

The following per unit information is available for a new product of Red Ribbon Company:

Desired ROI: € 20
Fixed cost: € 40
Variable cost: € 60
Total cost: € 100
Selling price: € 120

What would be Red Ribbon Company’s markup percentage?

A

The following per unit information is available for a new product of Red Ribbon Company:

Desired ROI: € 20
Fixed cost: € 40
Variable cost: € 60
Total cost: € 100
Selling price: € 120

What would be Red Ribbon Company’s markup percentage?

Answer: 20%

100 + x% = 120

x% = 120 - 100 = 20

28
Q

Bryson Company has just developed a new product. The following data is available for this product:

Desired ROI per unit: £ 30
Fixed cost per unit: £ 50
Variable cost per unit: £ 75
Total cost per unit: £ 125

What is the target selling price for this product?

A

Bryson Company has just developed a new product. The following data is available for this product:

Desired ROI per unit: £ 30
Fixed cost per unit: £ 50
Variable cost per unit: £ 75
Total cost per unit: £ 125

What is the target selling price for this product?

Answer: £ 155

30 + 50 +75 = £ 155

29
Q

A company has two divisions: one making components and the other electrical goods. The component division sells a heating ring to the electrical goods division to make kettles but this division can buy a similar component from an outside supplier for £12. The costs of a heating ring made by the component division include a variable cost of £8 and an allocation of overhead costs of £5. If there is spare capacity in the component division, what should the transfer price be?

a. Below £12
b. Above £8
c. Between £12 and £8
d. Above £12

A

A company has two divisions: one making components and the other electrical goods. The component division sells a heating ring to the electrical goods division to make kettles but this division can buy a similar component from an outside supplier for £12. The costs of a heating ring made by the component division include a variable cost of £8 and an allocation of overhead costs of £5. If there is spare capacity in the component division, what should the transfer price be?

c. Between £12 and £8

The transfer price must be at least the variable cost but lower than themarket price. Allocated costs are not relevant as there is spare capacity.

30
Q

Management of the Catering Company would like the Food Division to transfer 10,000 cans of its final product to the Restaurant Division for HK$30. The Food Division sells the product to customers for HK$70 per unit. The Food Division’s
variable cost per unit is HK$35 and its fixed cost per unit is HK$10. If the Food Division is currently operating at full capacity, what is the minimum transfer price the Food Division should accept?

A

Management of the Catering Company would like the Food Division to transfer 10,000 cans of its final product to the Restaurant Division for HK$30. The Food Division sells the product to customers for HK$70 per unit. The Food Division’s
variable cost per unit is HK$35 and its fixed cost per unit is HK$10. If the Food Division is currently operating at full capacity, what is the minimum transfer price the Food Division should accept?

Answer: HK$70 per unit

31
Q

Management of the Catering Company would like the Food Division to transfer 10,000 cans of its final product to the Restaurant Division for HK$30. The Food Division sells the product to customers for HK$70 per unit. The Food Division’s
variable cost per unit is HK$35 and its fixed cost per unit is HK$10. If the Food Division has 10,000 units available capacity, what is the minimum transfer price the Food Division should accept?

A

Management of the Catering Company would like the Food Division to transfer 10,000 cans of its final product to the Restaurant Division for HK$30. The Food Division sells the product to customers for HK$70 per unit. The Food Division’s
variable cost per unit is HK$35 and its fixed cost per unit is HK$10. If the Food Division has 10,000 units available capacity, what is the minimum transfer price the Food Division should accept?

Answer: HK$35

32
Q

Kwan Consulting provides financial consulting and has collected the following data for the next year’s budgeted activity for a lead consultant.

Consultants’ wages HK$90,000
Fringe benefits HK$22,500
Related overhead HK$17,500
Material supply clerk’s wages HK$18,000
Fringe benefits HK$4,000
Related overhead HK$20,000
Profit margin per hour HK$20
Profit margin on materials 15%
Total estimated consulting hours 5,000
Total estimated material costs HK$168,000

How much is the rate charged per hour of labor?

a. HK$42.50
b. HK$26.00
c. HK$41.50
d. HK$46.00

A

Kwan Consulting provides financial consulting and has collected the following data for the next year’s budgeted activity for a lead consultant.

Consultants’ wages HK$90,000
Fringe benefits HK$22,500
Related overhead HK$17,500
Material supply clerk’s wages HK$18,000
Fringe benefits HK$4,000
Related overhead HK$20,000
Profit margin per hour HK$20
Profit margin on materials 15%
Total estimated consulting hours 5,000
Total estimated material costs HK$168,000

How much is the rate charged per hour of labor?

d. HK$46.00

Calculate consultants wages, fringe benefits and related overhead divided by the budgeted hours: (90000+22500+17500)/5000 = HK$26

Profit margin per hour: HK$20

Total: 20 + 26 = HK$46

33
Q

Kwan Consulting provides financial consulting and has collected the following data for the next year’s budgeted activity for a lead consultant.

Consultants’ wages HK$90,000
Fringe benefits HK$22,500
Related overhead HK$17,500
Material supply clerk’s wages HK$18,000
Fringe benefits HK$4,000
Related overhead HK$20,000
Profit margin per hour HK$20
Profit margin on materials 15%
Total estimated consulting hours 5,000
Total estimated material costs HK$168,000

How much is the material handling/loading percentage?

a. 15%
b. 25%
c. 40%
d. 55%

A

Kwan Consulting provides financial consulting and has collected the following data for the next year’s budgeted activity for a lead consultant.

Consultants’ wages HK$90,000
Fringe benefits HK$22,500
Related overhead HK$17,500
Material supply clerk’s wages HK$18,000
Fringe benefits HK$4,000
Related overhead HK$20,000
Profit margin per hour HK$20
Profit margin on materials 15%
Total estimated consulting hours 5,000
Total estimated material costs HK$168,000

c. 40%

Calculate the material clerks wages: (18000+4000+20000) = 42000.

Percentage from materials: 42000/168000 = 25%

Profit margin for materials: 15%

Total: 15+25 = 40%

34
Q

Kwan Consulting provides financial consulting and has collected the following data for the next year’s budgeted activity for a lead consultant.

Consultants’ wages HK$90,000
Fringe benefits HK$22,500
Related overhead HK$17,500
Material supply clerk’s wages HK$18,000
Fringe benefits HK$4,000
Related overhead HK$20,000
Profit margin per hour HK$20
Profit margin on materials 15%
Total estimated consulting hours 5,000
Total estimated material costs HK$168,000

A consulting job takes 20 hours of consulting time and $180 of materials. How much will be the client’s bill?

a. HK$1,172
b. HK$772
c. HK$952
d. HK$1,100

A

Kwan Consulting provides financial consulting and has collected the following data for the next year’s budgeted activity for a lead consultant.

Consultants’ wages HK$90,000
Fringe benefits HK$22,500
Related overhead HK$17,500
Material supply clerk’s wages HK$18,000
Fringe benefits HK$4,000
Related overhead HK$20,000
Profit margin per hour HK$20
Profit margin on materials 15%
Total estimated consulting hours 5,000
Total estimated material costs HK$168,000

A consulting job takes 20 hours of consulting time and $180 of materials. How much will be the client’s bill?

a. HK$1,172

Calculate consultants fee. Calculate material loading charge percentage. Add material cost.

(20 x 46) + (180 x 40%) + 180 = HK$1,172

35
Q

Red Grass Company produces high definition television sets. The following information is available for this product:
Fixed cost per unit: €250
Variable cost per unit: €750
Total cost per unit: € 1,000
Desired ROI per unit: € 300

How much is the target selling price for this television?

A

Red Grass Company produces high definition television sets. The following information is available for this product:
Fixed cost per unit: €250
Variable cost per unit: €750
Total cost per unit: € 1,000
Desired ROI per unit: € 300

How much is the target selling price for this television?

Answer: € 1300