Leno Company makes swimsuits and sells these suits directly to retailers. Althou

Question

Leno Company makes swimsuits and sells these suits directly to retailers. Although Leno 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, Leno believes the All-Body suit would have the following manufacturing costs Direct materials Direct labor Manufacturing overhead Total costs $28 32 50 (a1) Your answer is correct. Assume that Leno uses cost-plus pricing, setting the selling price 27% above its costs, what would be the price charged for the All-Body swimsuit? (Round answer to 2 decimal places, e.g. 10.50.) Selling price 139.7 SHOW SOLUTIONSHOW ANSWER LINK TO TEXT LINK TO TEXT By accessing this Question Assistance, you will learn while you earn points based on the Point Potential Policy set by your instructor. Attempts: 1 of 3 used (b) Your answer is correct. Assume that Leno uses target costing. What is the price that Leno would charge the retailer for the All-Body swimsuit? Selling price 115

Explanation / Answer

a1 C. Deired selling price=$115 Desired profit=$28 per unit Target cost=115-28=$87 Second problem (b) Desired ROI=Assets*ROI in %=27484000*26%=7145840 Desired ROIper unit=7145840/515000=$ 13.88 per unit Third problem (b) Material Loading charges Total Invoice cost Material Loading Percentage Overhead costs: Parts manager’s salary and benefits 40000 Office employee’s salaryand benefits 10819 Other overhead 20200 Total 71019 404000 17.58% (71019/404000) Profit margin 26% Material loading percentage 43.58% Fourth problem (b) Material Loading charges Total Invoice cost Material Loading Percentage Material loading charge (a) 83.10% Overhead costs: Purchasing agents salary and fringe benefits 73648 Administrative salries and fringe benefits 21200 Other overhead 79373 Total (b) 174221 1248000 13.96% (174221/1248000) Profit margin on materials (a)-(b) 69%

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