Reference no: EM132730550
Case 1 - Walsec Inc. is in the process of developing a smart wallet that has a radio-frequency identification (RFID) costing to protecting owners against identity theft. Starting in January 2021, the company expects to be able to produce and sell the new wallets for three years. At that point, the company will have incurred $75,000 in development costs. Production of the new wallet will involve two production runs each year, each requiring $25,000 per run in setup costs. Direct costs of producing the wallets are expected to be $100,000 per run and each run is expected to produce 6,250 wallets. Indirect manufacturing costs charged to each run are $120,000. The company expects to incur destination charges averaging $2.50 per wallet. Additionally, Walsec Inc. is expecting customer service expenses to average $0.50 per wallet. In the first year of sales, Walsec Inc. intends to sell each wallet for $60. In each subsequent year, the company expects to increase the selling price by $8 each year. As well, the company expects that sales units will equal production units each year.
Required -
(A) What is Walsec Inc.'s life cycle budgeted revenues?
(B) What is Walsec Inc.'s life cycle budgeted costs?
(C) What is Walsec Inc.'s life cycle operating income?
(D) In what ways does product-life-cycle reporting help managers improving a company's overall operations?
Case 2 - Rapid Rivers Corporation currently manufactures and sells canoes for $3,000 and incurs total costs of $2,300 per canoe. Recently, a competitor has introduced a new canoe to the market that is selling for $2,500. To be competitive in the marketplace, management of Rapid Rivers Corp. believes that it must lower its selling price to match the competitor's price. By reducing the selling price, Rapid Rivers Corp.'s Marketing department estimates that sales will increase by 10 percent, even with the new competitor in the market. Currently, Rapid Rivers Corp.'s sales are 100,000 canoes per year
Required -
(A) Under cost-plus pricing, what is Rapid Rivers Corp. required selling price to achieve a 15% markup?
(B) If costs cannot be reduced and the target profit is changed to cost-plus 20%, what is Rapid River's target selling price?
(C) If Rapid Rivers Corp.'s target profit is 25% of the competitor's selling price, what is Rapid Rivers Corp. target cost?
(D) If Rapid Rivers Corp. wants to maintain its same income level and the Marketing department is correct, what is Rapid Rivers Corp.'s target cost? (E) Discuss problems that may arise when companies, such as Rapid Rivers Corp., seek to reduce costs to achieve a target cost.
Case 3 - BlueDot Company budgeted the following manufacturing overhead costs for the 2020 fiscal year.
Accounting & finance (support department) $500,000
Human resources (support department) $110,000
Industrial design (operating department) $315,000
Production (operating department) $175,000
Budgeted services provided by the Accounting & Finance department:
Human resources 20%
Industrial design 30%
Production 50%
Budgeted services provided by the Human Resources department:
Accounting & finance 15%
Industrial design 65%
Production 20%
Required -
(A) Using the information provided above, allocate costs from the supporting departments to the operating departments using the Direct Method.
(B) Ignoring your calculations in (A), use the information provided above to allocate costs from the supporting departments to the operating departments using the Step Down method with the Accounting & Finance department allocating first.
(C) Ignoring your calculations in (A) and (B), use the information provided above to allocate costs from the supporting departments to the operating departments using the Step Down method with the Human Resources department allocating first.
(D) Ignoring your calculations in (A) to (C), use the information provided above to allocate costs from the supporting departments to the operating departments using the Reciprocal Method using either linear equations or repeated iterations.