What is cost-plus pricing

Assignment Help Accounting Basics
Reference no: EM13320411

Consider the following information, prepared based on a capacity of 40,000 units:                   

  

Category

  
  

Cost per Unit

  
  

Variable   manufacturing costs

  
  

$5.00

  
  

Fixed   manufacturing costs

  
  

$1.50

  
  

Variable   marketing costs

  
  

$1.00

  
  

Fixed   marketing costs

  
  

$0.50

  

Capacity cannot be added in the short run and the firm currently sells the product for $10 per unit.

Consider each of these scenarios independent of each other.

a) The company is currently producing 30,000 units per month. A potential customer has contacted the firm and offered to purchase 10,000 units this month only. The customer is willing to pay $5.50 per unit. Since the potential customer approached the firm, there will be no variable marketing costs incurred. Should the company accept the special order? Why or why not? Be specific.

b) Assume the same facts as in part a, except that the company is producing 40,000 units per month. Should the company accept the special order? Why or why not? Be specific.

c) List and describe other factors (not those addressed in parts a and b) that should be taken into consideration when deciding whether to accept a special order? Be specific in your responses.

Question 3

a) What is life-cycle costing? Under what circumstances can it be most useful? What are some potential problems with this approach? Be specific in your responses.

b) What is target pricing? Under what circumstances can it be most useful? What are some potential problems with this approach? Be specific in your responses.

c) What is cost-plus pricing? Under what circumstances can it be most useful? What are some potential problems with this approach? Be specific in your responses.

Reference no: EM13320411

Questions Cloud

Determine the new q through the system at c : Parallel pipes, fixed overall H, ?EGL or hl = 75'. Elevated Tank A water surface is at El 625, 3000' away is Tank B with free surface El 550 They are connected by a 12" dia cast iron pipe.
Span of the children for the various commercials : The commercials were for clothes, food, and toys. At the .05 significance level is there a difference in the mean attention span of the children for the various commercials? Are there significant differences between pairs of means?
Petty fears and petty pleasures : In observing this reality, "we perceive that only great and worthy things have any permanent and absolute existence that petty fears and petty pleasures are but the shadow of the reality." In a culture dominated by social networking and high t..
Convergence of united states accounting standards : Within today's international business environment, there has been a great deal of discussion about the convergence of United States accounting standards
What is cost-plus pricing : What is cost-plus pricing? Under what circumstances can it be most useful? What are some potential problems with this approach? Be specific in your responses.
What is a rhetorical question : What is a rhetorical question?
Determine the total amount of product cost : Determine the total amount of product cost (cost of goods manufactured) and period cost incurred during August 2013.Total amount of product cost $
Calculate the rise in temperature : A person undergoing radiation treatment for a cancerous growth receives an absorbed dose of 1.8 Gy. All the radiation is absorbed by the gowth. Determine the rise in temperature
A final payment of interest : The loan will allow you to paid $300 in interest for three months and a final payment of interest and principal at the end of the four month.

Reviews

Write a Review

Accounting Basics Questions & Answers

  Computing sales taxes payable

Leister Auto Supply does not segregate sales and sales taxes at the time of sale. The register total for March 16 is $15,540. All sales are subject to a 5% sales tax. Compute sales taxes payable, and make the entry to record sales taxes payable an..

  Journal entry to record the bond issuance

Prepare the journal entry to record the bond issuance by Ryan on January 1, 2011.

  Variance between budget-actual amounts

A performance report for direct labor shows a variance between the budget and actual amounts. This difference is a:

  What is the total conversion cost

In the manufacture of 10,000 units of a product, direct materials cost incurred was $145,800, direct labor cost incurred was $82,000, and applied factory overhead was $45,500. What is the total conversion cost?

  Calculate monroe-s agi using the cash method

The income statement for Monroe's business shows thefollowing revenues and expenses for 2007, the initial years ofoperations. Calculate Monroe's AGI using the cash method.

  Production cost flow and measurement-journal entries

Edison Company manufactures wool blankets and accounts for production costs using process costing. The following information is available regarding its May inventories. Compute the cost of (a) products transferred from production to finished goods ..

  Account not affected by account receivable written off

Which of the following accounts is not affected when an account receivable written off as uncollectible is unexpectedly collected?

  Partnership earned net income

O. Guillen (beginning capital, $69,000) and K.Williams (beginning capital ($82,000) are partners. During 2008, the partnership earned net income of $71,400, and Guillen made drawings of $18,700 while Williams made drawings of $32,200.

  Allowance method used to account for bad debits

On Oct. 29 of the current year, a company concluded that a customer's $4,400 account receivable was uncollectible and that account should be written off. What efect will this write-off have on this company's net income and total assets assuming th..

  Capital structure and dividend policy-target structure

Maximum earnings per share (EPS), Minimum cost of debt (rd), Highest bond rating, Minimum cost of equity (rs), or Minimum weight average cost of capital (WACC).

  Relationship of acceptable audit risk

Explain why an auditor is likely to set both inherent and control risks at 100% for most segments. And explain the relationship of acceptable audit risk to planned detection risk and the effect of planned detection risk on evidence accumulation co..

  Record as gain on retirement of bonds

On March 1, 2011, Hess retired $400,000 of these bonds at 98 plus accrued interest. What should Hess record as a gain on retirement of these bonds? Ingore taxes.

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