Schopp Company makes swimsuits and sells these suits directly to retailers. Alth

Question

Schopp Company makes swimsuits and sells these suits directly to retailers. Although Schopp has a variety of suits, it does not make the All-Body suit used by highly skilled swimmers. The market research department believes that a strong market exists for this type of suit. The department indicates that the All-Body suit would sell for approximately $115. Given its experience, Schopp believes the All-Body suit would have the following manufacturing costs.
Direct materials $26
Direct labor 27
Manufacturing overhead 49
Total costs $102


Assume that Schopp uses cost-plus pricing, setting the selling price 20% above its costs. What would be the price charged for the All-Body swimsuit? (Round answer to 2 decimal places, e.g. 10.50.)
$__________

Assume that Schopp uses target costing. What is the price that Schopp would charge the retailer for the All-Body swimsuit? (Round answer to 2 decimal places, e.g. 10.50.)
$__________

What is the highest acceptable manufacturing cost Schopp would be willing to incur to produce the All-Body swimsuit, if it desired a profit of $27 per unit? (Assume target costing.)
$___________

Explanation / Answer

What is the price that Schopp would charge the retailer for the All-Body swimsuit Retailer Selling price = Cost + 24% of costs = 124% of Cost = $102 x 124% = $126.48 Assume that Mucky Duck uses target costing. What is the price that Mucky Duck would charge the retailer for the All-Body swimsuit? The price would be the estimated selling price i.e. $114 per suit. What is the highest acceptable manufacturing cost Schopp would be willing to incur to produce the All-Body swimsuit, if it desired a profit of $26 per unit? Selling price $114 Less : Desired profit $26 Target manufacturing cost $88

Related Questions

Navigate

• Browse (All)
• Browse S
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.