Question :
SHORT ANSWER.
Write the word or phrase that best completes each : 1196079
SHORT ANSWER.
Write the word or phrase that best completes each statement or answers the question. 71)
Valley West Amusement Park is evaluating its ticket prices. It is open during the summer months for 15 weeks. The following information pertains to last year’s tourist season.
Costs are expected to remain the same for this year.
Average tourists per day on Friday thru Tuesday2,500
Average tourists per day on Wednesday and Thursday1,000
Variable operating costs per day when open$ 4,100
Fixed overhead costs per year$180,000
Marketing costs per year$ 62,500
Customer service costs per year$ 5,000
Required:
What is the unit cost when establishing a long-run price for tour tickets? 71)
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72)
Schlickau Company manufactures basketball backboards.
The following information pertains to the
company’s normal operations per month:
Output units15,000 boards
Machine-hours4,000 hours
Direct manufacturing labor-hours5,000 hours
Direct manufacturing labor per hour$12
Direct materials per unit$100
Variable manufacturing overhead costs$150,000
Fixed manufacturing overhead costs $300,000
Product and process design costs$200,000
Marketing and distribution costs$250,000
Required:
a.For long-run pricing, what is the full-cost base per unit?
b.Schlickau Company is approached by an overseas city to fulfill a one-time-only special order for 1,000 units.
All cost relationships remain the same except for an additional one-time setup charge of $40,000. No additional design, marketing, or distribution costs will be incurred. What is the minimum acceptable bid per unit on this one-time-only special order?
72)
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73)
Muskoka Travel offers guided tours through the lake system. Muskoka Travel provides a guide, necessary equipment, and food for a fee of $75 per person per day. Currently the company is providing an average of 600 guide-days per month.
Based on available equipment and guides the maximum capacity is 950 guide-days (customers taken on the equivalent of an all day tour) per month.
Variable costs per guide-day for the year were as follows:
Food$7.50Guide’s salary$37.50
Supplies3.00Insurance12.00
Fixed costs per month during the year were as follows:
Equipment rental$7,500Marketing$3,000
Administration6,000Customer service
1,500
Required:
A group of foreign tourists has offered Muskoka Travel a proposal of 300 guide-days in July if they will cut the fee to $67.50 per guide-day. They have their own food and do not want to use the Muskoka Travel menus. Muskoka Travel will incur $300 in additional costs for busing the tourists back and forth to the camp site.
If fixed costs would not increase, should Muskoka Travel accept the special offer? 73)
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74)
Brady Lumber Company, a producer of oak lumber for furniture companies has an offer to supply a special load of lumber for an exporter. It will take three months to fill the order of 1,000,000 board metres. During the three months half of its production capacity will be utilized for the special order. The total fixed costs for the three months will be $6,000,000. Variable costs per 1,000 board metres will be $2,500.
The marketing manager believes that half of the capacity taken up by the special order can be utilized with regular business which will generate income of $240,000.
Required:
Determine the minimum price that needs to be charged for the special order. 74)
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75)
A college student, plans to operate a hot dog stand at the beach during the summer for three months. Her fixed costs for the booth, which include utilities, will be $2,600. Variable costs per hot dog will be $1.50 for materials and $0.40 for a franchise fee from the hot dog supplier. This year’s sales are expected to be 20,000 units based upon the operation of the same booth the prior year. Bridget needs to earn $10,000 so that she can pay part of her college expenses for the coming academic year.
Based on competitor’s prices, her target price is $2.40
Required:
Determine whether she can expect to earn the $10,000 at the target price. 75)
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76)
Do-It Company manufactures sinker molds for fishing.
A sinker mold has a price of $7.00, and costs currently assigned to it of $5.44. A competitor is introducing a new sinker mold that will sell for $6.00. Management believes it must lower the price to $6.00 in order to compete in the highly cost-conscious sinker mold. Marketing believes that the new price will maintain the current sales level. Do-It Company’s sales are currently 200,000 molds per year.
Required:
a.What is the target cost for the new price if target profit is 20 percent of sales?
b.What is the target selling price if costs cannot be reduced and target profit is changed to 15 percent of sales?
c.What is the change in operating income for the year if $6.00 is the new price and costs remain the same?
d.What is the target cost per unit if the selling price is reduced to $6.00 and the company wants to maintain its same income level? 76)
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77)
Robert’s Medical Equipment Company manufactures hospital beds.
Its most popular model, Deluxe,
sells for $5,000.
It has variable costs totaling $2,800 and fixed costs of $1,000 per unit, based on an average
production run of 5,000 units. It normally has four production runs a year, with $400,000 in setup costs
each time.
Plant capacity can handle up to six runs a year for a total of 30,000 beds.
A competitor is introducing a new hospital bed similar to Deluxe that will sell for $4,000.
Management believes it must lower the price to compete.
Marketing believes that the new price will
increase sales by 25% a year.
The plant manager thinks that production can increase by 25% with the
same level of fixed costs.
The company currently sells all the Deluxe beds it can produce.
Required:
a.What is the annual operating income from Deluxe at the current price of $5,000?
b.What is the annual operating income from Deluxe if the price is reduced to $4,000 and sales in units increase by 25%?
c.What is the target cost per unit for the new price if target operating income is 20% of sales?
77)
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78)
Reuter Avionics currently sells radios for $1,800.
It has costs of $1,400.
A competitor is bringing a new
radio to market that will sell for $1,600.
Management believes it must lower the price to $1,600 to
compete in the market for radios.
Marketing believes that the new price will cause sales to increase by
10%, even with a new competitor in the market.
Reuter’s sales are currently 1,000 radios per year.
Required:
a.What is the target cost if target operating income is 25% of sales?
b.What is the change in operating income if marketing is correct and only the sales price is changed?
c.What is the target cost if the company wants to maintain its same income level, and marketing is correct?
78)
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79)
Central Dental Company manufactures dental chairs. Its most popular model, Deluxe, sells for $2,500. It has variable costs totaling $1,400 and fixed costs of $500 per unit based on an average production run of 5,000 units. It normally has four production runs a year with $200,000 setup costs each time. Plant capacity can handle up to six runs a year for a total of 30,000 chairs.
A competitor is introducing a new dental chair similar to Deluxe that will sell for $2,000. Management believes it must lower the price in order to compete. Marketing believes that the new price will increase sales by 25 percent a year. The plant manager thinks that production can increase by 25 percent with the same level of fixed costs. The company currently sells all the Deluxe chairs it can produce.
Required:
What is the target cost per unit for the new price if target profit is 20 percent of sales? 79)
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80)
Frost, Inc. has budgeted sales of $150,000 with the following budgeted costs:
Direct materials$31,500
Direct labour20,500
Factory overhead:
Variable18,500
Fixed28,000
Selling and administrative expenses:
Variable12,000
Fixed16,000
Compute the target profit percentage for setting prices as a percentage of:
a.Total costs
b.Total variable costs
c.Variable manufacturing costs
d.Total manufacturing costs 80)
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