Horngren's Cost Accounting: A Managerial Emphasis (16th Edition)
16th Edition
ISBN: 9780134475585
Author: Srikant M. Datar, Madhav V. Rajan
Publisher: PEARSON
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Chapter 13, Problem 13.30P
Cost-plus, time and materials, ethics. C & S Mechanical sells and services plumbing, heating, and air-conditioning systems. C & S’s cost accounting system tracks two cost categories: direct labor and direct materials. C & S uses a time-and-materials pricing system, with direct labor marked up 90% and direct materials marked up 40% to recover indirect costs of support staff, support materials, and shared equipment and tools and to earn a profit.
During a hot summer day, the central air-conditioning in Brooke Lee’s home stops working. C & S technician John Anderson arrives at Lee’s home and inspects the air conditioner. He considers two options: replace the compressor or repair it. The cost information available to Anderson follows:
| Labor | Materials | |
| Repair option | 5 hrs. | $140 |
| Replace option | 2 hrs. | $240 |
| Labor rate | $30 per hr. |
- 1. If Anderson presents Lee with the replace or repair options, what price would he quote for each? Required
- 2. If the two options were equally effective for the 3 years that Lee intends to live in the home, which option would she choose?
- 3. If Anderson’s objective is to maximize profits, which option would he recommend to Lee? What would be the ethical course of action?
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V&S Mechanical sells and services plumbing, heating, and air conditioning systems. V&S's cost accounting system tracks two cost categories: direct labor and direct materials V&S uses a time-and-materials
pricing system, with direct labor marked up 100% and direct materials marked up 50% to recover indirect costs of support staff, support materials, and shared equipment and tools and to earn a profit
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Read the requirements
Requirement 1. If Dryden presents Lowry with the replace or repair options, what price would he quote for each?
Complete the table below to determine the price Dryden would quote for each option
Labor
Materials
Total Price
Repair option
Replace option
Requirements
1.
if Dryden presents Lowry with the replace or repair options, what price would he
quote for each?
2. If the two options were equally effective for the 3 years that Lowry intends to live in
the home, which option would she choose?
3.
if Dryden's objective is to…
Compute the product margins for B300 and T500 under the company's traditional costing system. Compute the product margins for B300 and T500 under the activity-based costing system. Prepare a quantitative
comparison of the traditional and activity-based cost assignments.
Cost classifications For each of the following costs, check the column(s) thatmost likely apply:Cost Variable FixedRaw materialsStaples used to secure packed boxes of productPlant janitors’ wagesOrder processing clerks’ wagesAdvertising expensesProduction workers’ wagesProduction supervisors’ salariesSales force commissionsMaintenance supplies usedPresident’s salaryElectricity costReal estate taxes for:FactoryOffi ce building
Chapter 13 Solutions
Horngren's Cost Accounting: A Managerial Emphasis (16th Edition)
Ch. 13 - What are the three major influences on pricing...Ch. 13 - Relevant costs for pricing decisions are full...Ch. 13 - Describe four purposes of cost allocation.Ch. 13 - How is activity-based costing useful for pricing...Ch. 13 - Describe two alternative approaches to long-run...Ch. 13 - What is a target cost per unit?Ch. 13 - Describe value engineering and its role in target...Ch. 13 - Give two examples of a value-added cost and two...Ch. 13 - It is not important for a company to distinguish...Ch. 13 - Prob. 13.10Q
Ch. 13 - Describe three alternative cost-plus pricing...Ch. 13 - Give two examples in which the difference in the...Ch. 13 - What is life-cycle budgeting?Ch. 13 - What are three benefits of using a product...Ch. 13 - Prob. 13.15QCh. 13 - Which of the following statements regarding price...Ch. 13 - Value-added, non-value-added costs. The Magill...Ch. 13 - Target operating income, value-added costs,...Ch. 13 - Target prices, target costs, activity-based...Ch. 13 - Target costs, effect of product-design changes on...Ch. 13 - Target costs, effect of process-design changes on...Ch. 13 - Cost-plus target return on investment pricing....Ch. 13 - Cost-plus, target pricing, working backward....Ch. 13 - Life-cycle budgeting and costing. Arnold...Ch. 13 - Considerations other than cost in pricing...Ch. 13 - Cost-plus, target pricing, working backward. The...Ch. 13 - Value engineering, target pricing, and target...Ch. 13 - Target service costs, value engineering,...Ch. 13 - Cost-plus, target return on investment pricing....Ch. 13 - Cost-plus, time and materials, ethics. C S...Ch. 13 - Cost-plus and market-based pricing. Georgia Temps,...Ch. 13 - Cost-plus and market-based pricing. (CMA, adapted)...Ch. 13 - Life-cycle costing. Maximum Metal Recycling and...Ch. 13 - Airline pricing, considerations other than cost in...Ch. 13 - Prob. 13.35PCh. 13 - Ethics and pricing. Instyle Interior Designs has...Ch. 13 - Value engineering, target pricing, and locked-in...
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