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Consider the information in Problem 8-11. Lauden Conference Solutions has decided to adopt an activity-based pricing scheme. On future jobs, the company will charge a 35 percent markup on the sum of product costs plus installer salaries. In addition, the company will charge $300 per change order, $90 per product return for products that are in excellent condition, and $85 per meeting hour with a Lauden conference room designer.In Problem 8-11, Lauden Conference Solutions specializes in the design and installation of meeting and conference centers for large corporations. When bidding on jobs, the company estimates product cost and direct labor for installers and marks up the total cost by 35 percent. On a recent job for Orvieto Industries, the company set its price as follows:Product costs including podiums, seating, lighting, etc...... $150,000Installer salaries...................... $25,000Total......................... $175,000Markup at 35 percent.................... $61,250Bid price......................... $236,250The job turned out to be a big hassle. Orvieto requested 25 change orders, although the dollar value of the products it requested changed very little. The Company also returned 30 items that had extremely minor flaws (scratches that were barely visible and would be expected in normal shipping). Orvieto also requested seven meetings with designers taking 35 hours before its plan was finalized. Normally, only two or three meetings are necessary.Nancy Jackson, controller for Lauden, decided to conduct a customer profitability analysis to determine the profitability of Orvieto. She grouped support costs into three categories with theFollowing drivers:Required:
a. What would the profit be on the order from Orvieto in Problem 8-11?b. Identify pros and cons of adopting the activity-based pricing scheme.
Calculate the net present value of the investment in the boat. Should the company make the investment?
How can I assign the total 2014 manufacturing overhead costs to the two products using activity based costing (ABC) and determine the overhead cost per unit.
Jessep Corporation has a standard cost system in which manufacturing overhead is applied to units of product on the basis of direct labor hours. The company has provided the following data concerning its fixed manufacturing overhead costs in March..
If Thomson Company did not issue any bonds payable during the year and its bonds payable account decreased by $200,000 over the course of a year.
Management is reviewing its decision and wants your advice. Should Eye-on-World have accepted the special order? Show your computations.
Write a brief report explaining the reason or reasons that best explain why Alcoa uses the LIFO cost flow method for its inventories kept in the United States and Canada, but the average cost method for its other inventories.
Determine the equivalent units of production and the unit costs for the Assembly Department and determine the assignment of costs to costs of goods transferred out and in process.
Explain how unit standards are set and why standard cost systems are adopted.
Explain the logical flow represented in the master budget, beginning with the organization goals and ending with the pro forma financial statements.
Determine whether Dawson Company should drop any game and write a memo to the manager with your recommendation.
ADP Mining Company mines an iron ore called Alpha.
Current operating income for Bay Area Cycles Co. is $70,000. Selling price per unit is $100, the contribution margin ratio is 35%, and fixed expense is $280,000.
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