ch12-AFM102s2012

How does it differ from the cost plus approach to

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Unformatted text preview: st) target costing: start with expected selling price less desired profit to determine the maximum allowance cost target cost = anticipated selling price – desired profit Managerial Accounting 12-47 Setting a Target Selling Price Here is information provided by the management of Ritter Company. Direct materials Direct labour Variable manufacturing overhead Fixed manufacturing overhead Variable S & A expenses Fixed S & A expenses Per Unit $ 6 4 3 Total $ 70,000 2 60,000 Assuming Ritter will produce and sell 10,000 Assuming units of the new product, and that Ritter typically uses a 50% markup percentage, let’s determine the unit product cost. the Managerial Accounting 12-48 Setting a Target Selling Price Ritter would establish a target selling price of $30 per unit to cover selling, general, and administrative expenses and contribute to profit. Direct materials Direct labour Variable manufacturing overhead Fixed manufacturing overhead Per Unit $ 6 4 3 7 ($70,000 ÷ 10,000 units = $7 per unit) Unit product cost 50% markup Target selling price Managerial A...
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This test prep was uploaded on 04/09/2014 for the course AFM 102 at Waterloo.

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