Lovell Computer Parts Inc. is in the process of setting a selling price on a new component it has just designed and developed. The following cost estimates for this new component have been provided by the accounting department for a budgeted volume of 50,000 units.
| Per Unit | Total | ||||||
| Direct materials | $52 | ||||||
| Direct labor | $22 | ||||||
| Variable manufacturing overhead | $18 | ||||||
| Fixed manufacturing overhead | $650,000 | ||||||
| Variable selling and administrative expenses | $16 | ||||||
| Fixed selling and administrative expenses | $400,000 | ||||||
Lovell Computer Parts management requests that the total cost per
unit be used in cost-plus pricing its products. On this particular
product, management also directs that the target price be set to
provide a 30% return on investment (ROI) on invested assets of
$1,000,000.
Compute the markup percentage and target selling price that will allow Lovell Computer Parts to earn its desired ROI of 30% on this new component. (Round markup percentage to 2 decimal places, e.g. 10.50%.)
| Markup percentage | % | ||
| Target selling price | $ |
eTextbook and Media
Assuming that the volume is 40,000 units, compute the markup percentage and target selling price that will allow Lovell Computer Parts to earn its desired ROI of 30% on this new component. (Round answers to 2 decimal places, e.g. 10.50% or 10.50.)
| Markup percentage | % | ||
| Target selling price | $ |
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In: Accounting
Lovell Computer Parts Inc. is in the process of setting a selling price on a new component it has just designed and developed. The following cost estimates for this new component have been provided by the accounting department for a budgeted volume of 45,000 units.
| Per Unit | Total | ||||||
| Direct materials | $51 | ||||||
| Direct labor | $27 | ||||||
| Variable manufacturing overhead | $24 | ||||||
| Fixed manufacturing overhead | $540,000 | ||||||
| Variable selling and administrative expenses | $17 | ||||||
| Fixed selling and administrative expenses | $405,000 | ||||||
Lovell Computer Parts management requests that the total cost per
unit be used in cost-plus pricing its products. On this particular
product, management also directs that the target price be set to
provide a 18% return on investment (ROI) on invested assets of
$1,000,000.
1. ) Compute the markup percentage and target selling price that
will allow Lovell Computer Parts to earn its desired ROI of 18% on
this new component. (Round markup percentage to 2
decimal places, e.g. 10.50%.)
| Markup percentage | % | ||
| Target selling price |
$ |
2.) Assuming that the volume is 36,000 units, compute the markup
percentage and target selling price that will allow Lovell Computer
Parts to earn its desired ROI of 18% on this new component.
(Round answers to 2 decimal places, e.g. 10.50% or
10.50.)
| Markup percentage | % | ||
| Target selling price | $ |
In: Accounting
Revenue and expense data for Innovation Quarter Inc. for two recent years are as follows:
| Current Year | Previous Year | |||
| Sales | $408,000 | $367,000 | ||
| Cost of goods sold | 265,200 | 220,200 | ||
| Selling expenses | 57,120 | 58,720 | ||
| Administrative expenses | 61,200 | 51,380 | ||
| Income tax expense | 8,160 | 14,680 | ||
a. Prepare an income statement in comparative form, stating each item for both years as a percent of sales. If required, round percentages to one decimal place. Enter all amounts as positive numbers.
| Innovation Quarter Inc. | ||||
| Comparative Income Statement | ||||
| For the Years Ended December 31 | ||||
| Current year Amount | Current year Percent | Previous year Amount | Previous year Percent | |
| Sales | $408,000 | % | $367,000 | % |
| Cost of goods sold | 265,200 | % | 220,200 | % |
| $ | % | $ | % | |
| Selling expenses | 57,120 | % | 58,720 | % |
| Administrative expenses | 61,200 | % | 51,380 | % |
| $ | % | $ | % | |
| % | % | |||
| Income tax expense | 8,160 | % | 14,680 | % |
| $ | % | $ | % | |
b. The vertical analysis indicates that the cost of goods sold as a percent of sales by 5 percentage points, while selling expenses by 2 percentage points, and administrative expenses by 1 percentage points. Thus, net income as a percent of sales by 2 percentage points.
In: Accounting
Revenue and expense data for Innovation Quarter Inc. for two recent years are as follows:
| Current Year | Previous Year | |||
| Sales | $381,000 | $328,000 | ||
| Cost of goods sold | 220,980 | 173,840 | ||
| Selling expenses | 64,770 | 62,320 | ||
| Administrative expenses | 68,580 | 55,760 | ||
| Income tax expense | 11,430 | 13,120 | ||
a. Prepare an income statement in comparative form, stating each item for both years as a percent of sales. If required, round percentages to one decimal place. Enter all amounts as positive numbers.
| Innovation Quarter Inc. | ||||
| Comparative Income Statement | ||||
| For the Years Ended December 31 | ||||
| Current year Amount | Current year Percent | Previous year Amount | Previous year Percent | |
| Sales | $381,000 | % | $328,000 | % |
| Cost of goods sold | 220,980 | % | 173,840 | % |
| $ | % | $ | % | |
| Selling expenses | 64,770 | % | 62,320 | % |
| Administrative expenses | 68,580 | % | 55,760 | % |
| $ | % | $ | % | |
| % | % | |||
| Income tax expense | 11,430 | % | 13,120 | % |
| $ | % | $ | % | |
b. The vertical analysis indicates that the cost of goods sold as a percent of sales by 5 percentage points, while selling expenses by 2 percentage points, and administrative expenses by 1 percentage points. Thus, net income as a percent of sales by 3 percentage points.
In: Accounting
CVP-Sensitivity analysis; spreadsheet recommended. Quality Cabinet construction is considering introducing a new cabinet-production seminar with the following price and cost characteristics.
Tution…………………………………………… $200 per Student
Variable Costs (wood, supplies, etc..)……………………. $120 per
Student
Fixed Costs (advertising, instructor’s safety, insurance,
etc.)………………….. $400.00 per year.
What enrollment enables Quality Cabinet construction to break even?
b. How many students will enable Quality Cabinet construction to make an operating profit of $200,000 for the year?
c. Assume that the projected enrollment for the year is 8,000 students for each of the following situations:
1. What will be the operating profit for 8,000 students?
2. What would be the operating profit if the tuition per student (that is,l sales price) decreased by 10 percent? Increased by 20 percent?
3. What should be the operating profit if variable costs per student decreased by 10 percent? Increased by 20 percent?
4. Suppose that fixed costs for the year are 10 percent lower than projected whereas variable costs per student are 10 percent higher than projected. What would be the operating profit for the year?
In: Accounting
On January 1, 2018, Worchester Construction leased International
Harvester equipment from Newton LeaseCorp. Newton LeaseCorp
purchased the equipment from Wellesley Harvester at a cost of
$999,738. Worchester borrowing rate for similar transactions is
10%.
The lease agreement specified four annual payments of $197,000
beginning January 1, 2018, the beginning of the lease, and at each
December 31 thereafter through 2020. The useful life of the
equipment is estimated to be six years. The present value of those
four payments at a discount rate of 10% is $686,910.
On January 1, 2020 (after two years and three payments), the
Worchester and Newton agreed to extend the lease term by two years.
The market rate of interest at that time was 9%.
Required:
1. Prepare the appropriate entries for
Worchester Construction on January 1, 2020, to adjust its lease
liability for the lease modification.
2. Prepare all appropriate entries for Newton
LeaseCorp on January 1, 2020, to record the lease
modification.
3. Prepare all appropriate entries for Worchester
Construction on December 31, 2020, related to the lease.
4. Prepare all appropriate entries for on December
31, 2020, related to the lease.
In: Accounting
E2-10 Analyzing the Effects of Transactions in T-Accounts LO2-4 Precision Builders Construction Company was incorporated by Chris Stoschek. The following activities occurred during the year: Received from three investors $58,000 cash and land valued at $33,000; each investor was issued 1,000 shares of common stock with a par value of $0.10 per share. Purchased construction equipment for use in the business at a cost of $53,000; one-fourth was paid in cash and the company signed a note for the balance (due in six months). Lent $3,000 to one of the investors who signed a note due in six months. Chris Stoschek purchased a truck for personal use; paid $6,900 down and signed a one-year note for $31,500. Paid $21,500 on the note for the construction equipment in (b) (ignore interest). Required: 1. Create T-accounts for the following accounts: Cash, Notes Receivable, Equipment, Land, Notes Payable, Common Stock, and Additional Paid-in Capital. Beginning balances are $0. For each of the preceding transactions, record the effects of the transaction in the appropriate T-accounts. Include good referencing for each T-account.
In: Accounting