09 Feb GIVEN: Kann Corporation produces industrial robots
GIVEN: Kann Corporation produces industrial robots for high-precision manufacturing. The following information is available:Per UnitTotalDirect materials$25.00Direct labor$10.00Variable manufacturing overhead$6.00Fixed manufacturing overhead$36,000Variable selling and administrative costs$4.00Fixed selling and administrative costs$15,000The company has a desired ROI of 20%. It has invested assets of $420,000. It anticipates making and selling 3,000 units per year.REQUIRED:Part 1: Using the total (full) cost concept, determine the (a) unit cost amount; (b) markup percentage; and (c) unit target selling price.Part 2: Using the product (absorption) cost concept, determine the (a) unit cost amount; and (b) markup percentage.Part 3: Using the variable cost concept, determine the (a) unit cost amount; and (b) markup percentage.Part 4: What is the target unit selling price under the three cost assumptions?Part 5: What else should be considered when setting the product’s selling price?Part 6: Which of the three costing concepts would be most appropriate in each of the following situations?External reporting for GAAPNormal (long-run) pricingEvaluating special ordersPart 7: Kann Corporation received a special order for 500 robots at $50 each from a foreign customer. Acceptance of the order would increase variable selling costs by $1.70 per unit because of shipping costs, but would not increase fixed costs or interfere with any current orders. Prepare a differential analysis to determine whether the special order should be accepted or not.
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