Chapter 19: Q19-12RQ (page 1063)
Explain the difference between the target price and target cost.
Target price is related to the customer’s will to pay for the project and the target cost is the maximum cost that a business incurs to achieve the target price keeping in view of desired profit.
Over 30 million students worldwide already upgrade their learning with Vaia!
All the tools & learning materials you need for study success - in one app.
Get started for free
Harcourt Pharmaceuticals manufactures an over-the-counter allergy medication. The company sells both large commercial containers of 1,000 capsules to health care facilities and travel packs of 20 capsules to shops in airports, train stations, and hotels. The following information has been developed to determine if an activity-based costing system would be beneficial:
Activity Estimated Estimated Quantity
Indirect Cost Allocation Base of Allocation Base
Materials handling \( 96,000 Number of kilos 24,000 kilos
Packaging 210,000 Number of machine hours 3,000 hours
Quality assurance 114,000 Number of samples 1,900 samples
Total indirect costs \) 420,000
Other production information includes the following:
Commercial Containers Travel Packs
Units produced 2,800 containers 51,000 packs
Weight in kilos 9,800 5,100
Machine hours 1,960 510
Number of samples 560 765
Requirements
4. Compare the indirect activity-based costs per unit to the indirect costs per unit from the traditional system. How have the unit costs changed? Explain why the costs changed as they did.
Koehler (see Exercise E19-15) makes handheld calculators in two models—basic and professional—and wants to refine its costing system by allocating overhead using departmental rates. The estimated \(721,000 of manufacturing overhead has been divided into two cost pools: Assembly Department and Packaging Department. The following data have been compiled:
Assembly Packaging
Department Department Total
Overhead costs \) 456,500
Machine hours:
Basic Model 185,000 MHr 45,000 MHr 230,000 MHr
Professional Model 230,000 MHr 55,000 MHr 285,000 MHr
Total 415,000 MH 100,000 MHr 515,000 MHr
Direct labor hours:
Basic Model 20,000 DLHr 50,000 DLHr 70,000 DLHr
Professional Model 105,125 DLHr 280,625 DLHr 385,750 DLHr
Total 125,125 DLHr 330,625 DLHr 455,750 DLHr
Compute the predetermined overhead allocation rates using machine hours as the allocation base for the Assembly Department and direct labor hours for the Packaging Department. How much overhead is allocated to the basic model? To the professional model? Round allocation rates to two decimal places and allocated costs to whole dollars.
Question:High Mountain produces fleece jackets. The company uses JIT costing for its JIT production system.
High Mountain has two inventory accounts: Raw and In-Process Inventory and
Finished Goods Inventory. On April 1, 2018, the account balances were Raw and In-Process Inventory,
The standard cost of a jacket is
conversion costs. Data for April’s activities follow:
Number of jackets completed 19,000
Number of jackets sold (on account for \)50 each) 18,600
Direct materials purchased (on account) \( 220,500
Conversion costs incurred \) 500,000
Requirements
1. What are the major features of a JIT production system such as that of High Mountain?
2. Prepare summary journal entries for April. Underallocated or overallocated
conversion costs are adjusted to Cost of Goods Sold monthly.
3. Use a T-account to determine the April 30, 2018, balance of Raw and In-ProcessInventory.
Rennie Plant Service completed a special landscaping job for Brenton Company. rennie uses ABC and has the following predetermined overhead allocation rates:
Activity Predetermined
Allocation Base Overhead Allocation Rate
Designing Number of designs \( 290 per design
Planting Number of plants \) 20 per plant
The Rennie job included
Requirements
2. If Brenton paid $3,690 for the job, what is the operating income or loss?
Question:Refer to Exercise E19-26. Western desires a 20% target net profit after covering all costs. Considering the total costs assigned to the Halbert engagement in Exercise E19-26, what would Western have to charge the customer to achieve that net profit? Roundto two decimal places.
What do you think about this solution?
We value your feedback to improve our textbook solutions.
