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I-Asgn10 - LESSON 10 Assignment Question 1(9 marks Computer...

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LESSON 10 Assignment Question 1 (9 marks) Computer question Before attempting this question, you should work through Computer illustration 10-1 in the Lesson Notes. Description Lemhi Products Ltd. manufactures a variety of electrical products. The company wants to introduce a new electric motor that would have the following cost characteristics (based on an activity level of 50,000 motors produced and sold each year): Per motor Total Direct materials ...................................................................... € 18 Direct labour .......................................................................... 40 Variable overhead .................................................................. 7 Fixed overhead ....................................................................... 20 €1,000,000 Variable selling and administrative expenses ........................ 5 Fixed selling and administrative expenses ............................. 16 800,000 After careful study, the company has determined that production of the new motor would require an investment of €3,250,000 in order to purchase equipment, carry inventories, and provide for other working capital needs. The company desires a 20% return on investment for all new products. Required Use the procedure described below to complete the worksheet for LXP1S. From this worksheet, answer the following questions: a. (3 marks) What is the markup percentage required to achieve the company’s desired 20% ROI under the following: (i) absorption costing (ii) contribution costing b. (6 marks in total) (i) (3 marks) What is the target selling price required to achieve the company’s desired 20% ROI under absorption costing and contribution costing? (ii) (3 marks) Is it coincidental that the target-selling price is the same under both options? Explain. Management Accounting Fundamentals Assignment 10 1
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Procedure 1. Open the file MA1LXP1 and click the LXP1S sheet tab for the solution worksheet. 2. Change the label in cell A1 to read MA1: LESSON 10: QUESTION 1 3. Change the values in the data table to reflect the information given in the Description. 4. Observe the results obtained in rows 26, 28, 37, and 38. 5. Save your completed worksheet under a name other than MA1LXP1. 6. Copy and paste cells A1 to E39 into your assignment Word document. Question 2 (15 marks) Computer question Euclid Fashions, Inc. has designed a sport jacket that is about to be introduced on the market. A standard cost card has been prepared for the new jacket, as shown below: Standard quantity of hours Standard price or rate Standard cost Direct materials Direct labour Manufacturing overhead (1/6 variable) 2.0 metres 1.4 hours 1.4 hours €4.60 per metre 10.00 per hour 12.00 per hour € 9.20 14.00 16 .80 Total standard cost per jacket 40 .00 The following additional information relating to the new jacket is available: The only variable selling, general and administrative costs on the jacket will be €4 per Jacket for shipping. Fixed selling, general, and administrative costs will be (per year) Salaries 90,000 Advertising and other 384,000 Total 474,000 a. Since the company manufactures many products, it is felt that no more than 21,000 hours of labour time per year can be devoted to production of the new jackets.
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