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# Chp 8 additional solutions - EXERCISE 8-3(a(1 In this case...

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EXERCISE 8-3 (a) (1) In this case the selling price would be \$125 (\$100 + [\$100 X 25%]). The problem with the \$125 is that it is unlikely that Mucky Duck will be able to sell any All-Body suits at that price. Market research seems to indicate that it will sell for only \$110. (2) One way that Mucky Duck might consider manufacturing the All-Body swimsuit is if it has excess capacity and therefore manufacturing the All-Body will not affect fixed costs. Thus if the company can cover its variable costs it might want to sell at the \$110 level. (b) In this case the amount would be the selling price of \$110. (c) The highest acceptable cost would be the target cost. The target cost is \$85 as shown below: Target cost = Market price Desired profit \$85 = \$110 \$25 EXERCISE 8-6 (a) Total cost per session: Per Session Direct materials \$ 20 Direct labor 400 Variable overhead 50 Fixed overhead (\$950,000 ÷ 1,000) 950 Variable selling & administrative expenses 40 Fixed selling & administrative expenses (\$500,000 ÷ 1,000) 500 Total cost per session \$1,960 (b) Desired ROI per session = (20% X \$2,058,000) ÷ 1,000 = \$411.60 (c) Mark-up percentage on total cost per session = \$411.60 ÷

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Chp 8 additional solutions - EXERCISE 8-3(a(1 In this case...

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