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Euclid Fashions Inc is introducing a sports jacket A standard cost card has been prepared for the new jacket as shown below The following additional information relating to the new jacket is

Euclid Fashions, Inc., is introducing a sports jacket. A standard cost card has been prepared for the new jacket, as shown below:  The following additional information relating to the new jacket is available: a. The only variable selling and administrative cost will be $4 per jacket for shipping. Fixed selling and administrative costs will be (per year): Salaries . . . . . . . . . . . . . . . . . . $ 90,000 Advertising and other . . . . . . . 384,000 Total . . . . . . . . . . . . . . . . . . . . $474,000 b. Since the company manufactures many products, no more than 21,000 direct labor-hours per year can be devoted to production of the new jackets. c. An investment of $900,000 will be necessary to carry inventories and accounts receivable and to purchase some new equipment. The company’s required rate of return is 24%. d. Manufacturing overhead costs are allocated to products on the basis of direct labor-hours. Required: 1. Assume that the company uses the absorption approach to cost-plus pricing. a. Compute the markup that the company needs on the jackets to achieve a 24% ROI if it sells all of the jackets it can produce using 21,000 hours of labor time. b. Using the markup you have computed, prepare a price quote sheet for a single jacket. c. Assume that the company is able to sell all of the jackets that it can produce. Prepare an income statement for the first year of activity, and compute the company’s ROI for the year on the jackets, using the ROI formul

Jun 27 2020 View more View Less

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