What would operating income have been with the order

Assignment Help Accounting Basics

Reference no: EM131816516

Question: Cost Analysis and Pricing The budget for the Oxford University Printing Company for 20X1 follows:

The company typically uses a so-called cost-plus pricing system. Direct-material and direct-labor costs are computed, overhead is added at a rate of 115% of direct-labor costs, and 10% of the total cost is added to obtain the selling price. Edith Smythe, the sales manager, has placed a £23,000 bid on a particularly large order with a cost of £5,300 direct material and £6,200 direct labor. The customer informs her that she can have the business for £16,000, take it or leave it. If Smythe accepts the order, total sales for 20X1 will be £1,144,600. Smythe refuses the order, saying, "I sell on a cost-plus basis. It is bad policy to accept orders at below cost. I would lose £2,630 on the job." The company's annual fixed overhead is £170,000.

1. What would operating income have been with the order? Without the order? Show your computations.

2. Give a short description of a contribution-margin technique to pricing that Smythe might follow to achieve a price of £23,000 on the order.

Reference no: EM131816516

Questions Cloud

Prepare an analysis for transnational using given technique : A large Boston manufacturer has inquired about whether Transnational would be interested in trucking a large order of its parts to Chicago.

Single-factor productivity and multi-factor productivity : which is to include a productivity analysis for his department. One of the inputs is production data prepared by Sharon Walford

Apply the value chain model to flextime : Describe how each of the primary value chain activities pertains to FlexTime. Rank the importance of that activity to FlexTime's success on a scale.

Access the student survey data : Use software to access the student survey data and complete the following tasks.

What would operating income have been with the order : The company typically uses a so-called cost-plus pricing system. Direct-material and direct-labor costs are computed, overhead is added at a rate of 115%.

How did the company handle the sales process : How did the company handle the sales process under its old system? How does CRM integrate with ERP

Stemplot for ages at death : The mean age at death is 15 years and the standard deviation is 7 years. What percentage of the dinosaurs' ages were within 1 standard deviation of the mean?

Prepare a tabulation of the performance for the full year : Prepare a tabulation of the performance for the full year including the final course. Assume that the costs of the final course for the 30 enrollees'.

Display the data with a histogram : Here are data for per capita beer consumption (in liters per person per year) in 18 countries during 2002.18

User Account

All Pages