29 Jun Question 66. Johnson Marine has the following costs an
Question
66.
Johnson Marine has the following costs and expected sales for the coming year. Johnson is considering a number of different methods to determine the price of its product.
If Johnson determines price using a desired return on life cycle costs of 30%, the price is:
A. $262.50
B. $306.00
C. $375.00
D. $364.29
E. $330.00
67. Johnson Marine has the following costs and expected sales for the coming year. Johnson is considering a number of different methods to determine the price of its product.
If Johnson determines price using a 20% markup of life cycle cost, the price is:
A. $262.50
B. $306.00
C. $375.00
D. $364.29
E. $330.00
68. Precision Instruments, Inc. is a national firm manufacturing a full line of surgical tools for veterinarians. Recent technological developments have produced a significantly higher grade of steel to make surgical instruments and tools. All of Precision’s specialized equipment is designed and calibrated to produce surgical tools using current surgical steel stock. Precision’s management wants to begin using the new grade of surgical steel, but recognizes the need to redesign and calibrate existing production equipment and/or purchase newly designed production equipment. Redesign of existing equipment can be done in-house, but requires components from the Swedish manufacturer of the equipment. New equipment will also come from Sweden, but its cost is almost double that paid seven years ago for the existing equipment.
Required: Identify the constraints Precision will face as it chooses to upgrade existing equipment or purchase new equipment. There isconsiderable market pressure to shift to use of the new steel stock for production of surgical tools.
69. DualShaft Inc. manufactures a wide variety of parts for recreational boating, including boat engines. The component is purchased by OEM (original equipment manufacturers) such as Mercury and Honda, for use in the larger and more powerful outboards. The units sell for $790, and sales volume averages 38,000 units per year. Recently, DualShaft’s major competitor lowered the price of the equivalent part to $710. The market was very competitive, and DualShaft realized it had to meet the new price or lose significant market share. The controller assembled the following data for the most recent year.
Cost and Usage for Production of 38,000 Units:
Required: 1. Calculate the target cost for maintaining current market share and profitability.2. How should the company attempt to reduce cost to meet the new target cost?
70.
Cling Co. produces and sells three products (X, Y, and Z). The following data relate to the three products. Labor is a fixed cost.
Required: (1) Which is the most profitable product if there is no labor constraint? (2) Which is the most profitable product if there is a
labor constraint?
71. Pat Baldwin owns and operates Outstanding Quality Rentals (OQR). OQR offers kayak rentals and shuttle service on the Petaholee River. Customers can rent kayaks at one station and enter the river there. They can then exit at one of two designated locations to catch a shuttle to return them to their vehicles. Following are the costs involved in providing this service each year.
OQR began business three years ago with a $36,000 expenditure for a fleet of 50 kayaks. These are expected to last seven more years, at which time a new fleet will be purchased. Pat is satisfied with the steady average rentals per year of 9,900.
Required: What price should Pat charge per rental for the business to make a thirty percent life cycle profit?
72. Bell Company produces and sells three products (A,B,C). The following data relate to the three products.
Required: (1) Calculate the contribution per labor minute for each product. (2) Determine the best product mix. Assume there are fiveemployees, and given time for breaks, training, and regular meetings, there are a total of 2,200 minutes available per day.
73. The management accountant at the Huang Manufacturing Company has collected the following data in preparation for a life cycle analysis on one of its products, a leaf blower:
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