Question

Corrientes Company produces a single product in its Buenos Aires plant that currently sells for 6.80p per unit. Fixed costs are expected to amount to 56,000p for the year, and all variable manufacturing and administrative costs are expected to be incurred at a rate of 2.30p per unit. Corrientes has two salespeople who are paid strictly on a commission basis. Their commission is 8 percent of the sales revenue they generate. (Ignore income taxes.) (p denotes the peso, Argentina’s national currency. Many countries use the peso as their national currency. On the day this exercise was written, Argentina’s peso was worth .104 U.S. dollar.)

1a) Suppose management alters its current plans by spending an additional amount of 4,300p on advertising and increases the selling price to 7.80p per unit. Calculate the profit on 66,000 units. (Do not round intermediate calculations. Enter your answer in pesos.)

1b) The Sorde Company has just approached Corrientes to make a special one-time purchase of 19,000 units. These units would not be sold by the sales personnel, and, therefore, no commission would have to be paid. What is the price Corrientes would have to charge per unit on this special order to earn additional profit of 43,700p? (Round your answer to 2 decimal places. Enter your answer in pesos.)

1c) What is Leno’s current selling price of item no. 8976?

1d) If Leno used target costing for item no. 8976, what must happen to costs if the company desires to meet the market price and maintain its current rate of profit on sales? By how much?

1e) Would the identification of value-added and non-value-added costs assist Leno in this situation? (Yes or No)

1f) Suppose that by previous cost-cutting drives, costs had already been “pared to the bone” on item no. 8976. What might Leno be forced to do with its markup on cost to remain competitive? By how much? (Do not round intermediate calculations. Round your percentage answer to 2 decimal places (i.e., .1234 should be entered as 12.34).)

1g) In many industries, prices are the result of an interaction between market forces and costs. (True or False)

Answer 1

Please give positive ratings so I can keep answering. Thanks!

Regarding Q 1c to Q1f. Please upload the entire context. Then only I would be able to solve..

Particulars	Peso
Sell Price	6.80	A
Sales commission	8%	B
Sales commission	0.54	C=A*B
Net Sell Price	6.26	D=A-C
Variable cost	2.30	E
Contribution per unit	3.96	F=D-E
Fixed Cost	56,000.00	G
Ans to 1a
Particulars	Peso
Sell Price	7.80	H
Sales commission	8%	B
Sales commission	0.62	I=H*B
Net Sell Price	7.18	J=H-I
Variable cost	2.30	E
Contribution per unit	4.88	K=J-E
Number of units	66,000.00	L
Contribution amount	321,816.00	M=K*L
Fixed Cost	56,000.00	G
Advertising	4,300.00	N
Profit	261,516.00	O=M-G-N
Ans to 1b
Particulars	Peso
Additional profit required	43,700.00	P
Number of units	19,000.00	Q
Profit per unit	2.30	R=P/Q
Variable cost	2.30	E
Target Sell Price	4.60	S=R+E