6. Algeria Transport Company has average invested capital of $880,000 and a targ
ID: 2535680 • Letter: 6
Question
6.
Algeria Transport Company has average invested capital of $880,000 and a target return on investment of 13%. The total cost per unit is $20 based on a volume level of 33,000 units. Albany's markup percentage on total cost is:
Multiple Choice
9.750%.
17.3%.
62.0%.
75.0%.
None of these.
9.
Quantum Enterprises currently sells a piece of luggage for $230. An aggressive competitor has announced plans for a similar product that will be sold for $185. Quantum's marketing department believes that if the price is dropped to meet competition, unit sales will increase by 10%. The current cost to manufacture and distribute the luggage is $145, and Quantum has a profit goal of 35% of sales. If Quantum meets competitive selling prices, what must happen to the company's manufacturing and distribution cost?
Multiple Choice
Nothing, because the costs are within defined ranges and can actually increase by $4.50.
Nothing, because the costs are within defined ranges and can actually increase by $19.45.
Costs must decrease by $24.75.
Costs must decrease by $50.75.
None of these.
10.
Madison produces bicycles in a highly competitive market. During the past year, the company has added a 40% markup on the $410 manufacturing cost for one of its most popular models. A new competitor manufactures a similar model, has established a $460 selling price, and is seriously eroding Madison's market share. Management now desires to use a target-costing approach to remain competitive and is willing to accept a 30% return on sales. If target costing is used, which of the following choices correctly denotes (1) the price that Madison will charge and (2) company's target cost?
Multiple Choice
Choice A
Choice B
Choice C
Choice D
Choice E
11.
Paul's Auto Repair uses time and material pricing. The body shop, which anticipates 10,000 direct labor hours of activity, has the following data:
The time charge per hour is (Do not round your intermediate calculations.):
Multiple Choice
$24.05.
$32.85.
$35.50.
$44.30.
None of these.
Selling Price Target Cost A. $460 $322 B. $460 $410 C. $574 $322 D. $574 $410 E. Some other combination of selling price and target cost.Explanation / Answer
6)Markup = 880000*.13=114400
Total cost = 33*20000=660000
Markup on total cost = 114400 /660000
= .1733 or 17.33%
correct option is "B"-17.3%
9)correct option is "C" -Costs must decrease by $24.75.
Cost revised = Price (1-profit)
185 [1-.35]
120.25
Cost decrease by 145-120.25 = 24.75
10)correct option is "A"
Selling ;price is to be 460 or less in order to be competitve
Target cost : 460 [1-.30 ] = 322
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