Acc 349 Team Problems Week 5

Topics: Costs, Total cost, Variable cost Pages: 4 (1068 words) Published: April 25, 2013
Learning Team Week 5


Problem P8-2A
Variable Cost per unit:
Direct materials $50
Direct labor $25
Variable manufacturing overhead $20
Variable selling and administrative expenses $18
Total Variable Cost$113
Fixed cost per unit:
Total Cost ÷ Budgeted Volume = cost per unit
Fixed manufacturing overhead$600,000 ÷50000=12
Fixed selling and administrative expenses $400,000 ÷50000=8 Fixed cost per unit1,000,000$20
Total unit cost = 113 + 20 = $133
(a) Desired ROI per unit = (1,200,000 x 0.25) ÷ 50000 = 6 Markup percentage = Desired ROI ÷ Total Unit Cost
= 6÷133
= 4.51%
Target Selling Price = Total Unit Cost + Desired ROI per unit
= 133 + 6
= 139
(b) Variable cost per unit113
Fixed cost per unit (1,000,000 ÷ 40,000) 25
Total unit cost 138
Desired ROI (1,200,000 x 0.25) ÷ 40,0007.50
Target Selling Price 145.50
Markup Percentage = 7.50 ÷ 138
= 5.43%

A) Top management may want them to start doing business between divisions because the qualities of the products are better then what they get for the wheel bearings currently. It could also be that the top management wants to test to see how the divisions interact with each other and to see if using this method of getting the bearings internally will be more profitable for the company. Also being able to cut down costs (marketing) would also help the company out in the long run especially if the company has a tight budget to deal with. B) The conditions when a buying division should be forced to buy from an internal source should be when the price or quality of the internal product is better than the outside source. If the company is also trying to change the way that it does business this can apply as well. For instance if a company such as the one in this example makes the parts that they need using their own parts would be a better idea since the company knows the quality...
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