Anticipated selling price

Assignment Help Managerial Accounting
Reference no: EM1349247

Baker, Inc., produces a number of components that are used in home theater systems. Fred Briggs, head of the company's market research department, has identified the need for a new component that will most likely sell for $75. Projected volume levels are anticipated to reach 28,000 units in the first year, as several firmly entrenched competitors will be introducing a similar product in the not-too-distant future.

Conversations with Baker's engineers and reviews of cost accounting data related to similar products that the company manufactures resulted in the following cost estimates for the new component:

Direct Materials $18

Direct Labor $36

Manufacturing Overhead $16

Selling and Administrative $5

Baker currently uses cost-plus pricing and adds a 20% markup on total production cost to arrive at what is normally a competitive selling price.


A. What is the anticipated selling price of the new component if Baker uses its current pricing policy? What difficulties, if any, might the company face in the marketplace?

B. Assume that Baker decides to switch to target costing. What price would the company charge for the new component?

C. With the switch to target costing, what would Baker have to do to the component's manufacturing cost to achieve the normal profit margin on sales? Be specific and show calculations.

D. Briefly describe a process that Baker can use to achieve your answer in requirement "C."

Reference no: EM1349247

The company plans to open a third department in january

Bonanza Entertainment began operations in January 2013 with two operating (selling) departments and one service (office) department. Its departmental income statements follow.

Compute each project payback period

The equipment's salvage value is zero, and Doug uses straight-line depreciation. Doug will not accept any project with a cash payback period over 2 years. Doug's required r

What would you do if you were debbie

Do you think that the tax minimization scheme described to Debbie Kishimoto is in harmony with the ethical behavior that should be displayed by top corporate executives? Why

What do you conclude about the relationship

What would the price and P/E ratio be if the firm paid out all earnings as dividends? What do you conclude about the relationship between growth opportunities and P/E ratios?

Statement of no longer than one-page to the audit committee

You are the chief financial officer of General Motors Corporation (GM) at the beginning of 2009. The company’s board of directors has asked you to inform board’s audit committ

Perth corporation has two operating divisions

Perth Corporation has two operating divisions, a casino and a hotel. The two divisions meet the requirements for segment disclosures. Before transactions between the two divis

Cash conversion cycle-breakeven

A firm has annual operating outlays of $1,800,000 and a cash conversion cycle of 60 days. If the firm currently pays 12 percent for negotiated financing and reduces its cash

How would you measure performance in each of these areas

How would you measure performance in each of these areas? Be specific. Can the other goals be encompassed as ingredients of a formal measure of profitability? In other word,


Write a Review

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd