16-22 - 1622 1637 Selling prices for the five boats would...

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Unformatted text preview: 1622 1637 Selling prices for the five boats would be as follows: A B C D E Offer price $ 500.00 $1 ,200.00 $ 900.00 $2, 100.00 $2,300.00 Parts 137 .80 43.95 43.50 16.45 27 10 4. Labor Repair shop 210.00 70.00 35.00 35.00 1 75.00 Body shop 160.00 40.00 Overheada 140.00 140.00 140.00 140.00 1 40.00 Profit for Dealership 50.00 50.00 50.00 50.00 50.00 Total $1 ,037 .80 $1 ,663.95 $1 168.50 $2,381 , .45 $2,939. 10 Commissionb 115.31 184.88 129.83 264.61 326.57 Selling price $1 153. , 11 $1,848.83 $1 ,298.33 $2,646.06 $3,265.67 a"Overhead" in the above price computation was computed as follows: Expected overhead cost for the year Rate per boat = Expected boats to be sold $72,800 = 520 = $140 per boat bThe sales commission is to be 10% of the selling price. This means that the other costs plus the profit margin must be 90% of the selling price. In the computation above, the selling price is computed by dividing the total cost plus profit (excluding commission) by 90%. The commission is then 10% of that computed selling price. For example, for boat A the commission is computed as follows: Selling price = $1,037 .80 0.90 = $1 153. , 11 Commission = 10% x $1 153. , 11 = $115.31 There are both similarities and differences between pricing computations made in this situation and a job order cost system used by a manufacturing company . These are discussed below . Two major differences should be pointed out immediately . The first is the nature of the business. The used boat operation in this situation is not engaged in manufacturing anything. Thus none of the costs are manufacturing costs. In contrast, a job order system used by a manufacturing company deals exclusively with manufacturing costs. ...
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