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201-Quiz3-Version1(Pink)-Solutions-S'10 (1)

201-Quiz3-Version1(Pink)-Solutions-S'10 (1) - Name(Please...

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Name (Please print): Section: Management 201 - Spring 2010 – Quiz 3 Version 1 (Pink) - Solution Logical work must be shown on any question to receive positive points. You may not use calculators that can store information or communicate with someone. Cheating on a quiz will result in failure of the course. A. E. BERG AND SONS E. Berg and Sons build custom-made pleasure boats, which range in price from $10,000 to $250,000. For the past 30 years, Mr. Berg, Sr., has determined the selling price of each boat by estimating the costs of material, labor, a prorated portion of overhead, and adding 20% to these estimated costs. For example, a recent price quotation for boat A was determined as follows: Direct materials $5,000 Direct labor 8,000 Total manufacturing overhead 2,000 TOTAL COSTS $15,000 Markup of 20% 3,000 SELLING PRICE $18,000 The overhead figure was determined by estimating total overhead costs for the year and allocating them at 25% of direct labor costs. If a customer rejected his price and business was slack, Mr. Berg, Sr., would often be willing to reduce his markup to as little as 5% over estimated costs. Thus, the average markup for the year is estimated at 15%.
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