Question

Question:Blanchette Plant Service completed a special landscaping job for Kerry Company. Blanchette 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 Kerry job included \(750 in plants; \)1,300 in direct labor; one design; and 30 plants.

Requirements

3. If Blanchette desires an operating income of 30% of cost, how much should the company charge for the Kerry job?

Short answer

Answer

Sales price: $2,847

Step-by-step solution

Full product cost

Full product cost is the total cost relating to developing, producing, and delivering the product or services. It includes all the pre-production, during-production, and post-production costs.

Full product cost is used to determine the sales price under cost-based pricing.

Computation of sales price

$$\begin{gathered} \mathit{S}\mathit{a}\mathit{l}\mathit{e}\mathit{s}\mathbf{}\mathit{p}\mathit{r}\mathit{i}\mathit{c}\mathit{e}\mathbf{}\mathbf{=}\mathit{T}\mathit{o}\mathit{t}\mathit{a}\mathit{l}\mathbf{}\mathbf{cos}\mathit{t}\mathbf{}\mathbf{+}\frac{\left(100+\cos tpercent\right)}{\mathbf{100}} \\ \mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{=}\mathbf{\$}\mathbf{2}\mathbf{,}\mathbf{190}\mathbf{\times }\frac{\mathbf{130}}{\mathbf{100}} \\ \mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{=}\mathbf{\$}\mathbf{2}\mathbf{,}\mathbf{847} \end{gathered}$$