MBA 6045 F1-01 - 2008 - Managerial Accounting
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2020 - August
MBA6045F1012008
Topic 5
Week 5 Current Designs Case Problem
Week 5 Current Designs Case Problem
This week we will continue working on the Current
Designs case problem. The weekly case problem will cover the
concepts that are covered during the current week. Here is the what
you will work on in Module 5:
As a service to its customers, Current Designs repairs
damaged kayaks. This is especially valuable to customers that have
made a significant investment in the composite kayaks. To price the
repair jobs, Current Designs uses time-and-material pricing with a
desired profit margin of $20 per labor hour and a 50% materials
loading charge.
Recently, Bill Johnson, Vice President of Sales and Marketing,
received a phone call from a dealer in Brainerd, Minnesota. The
dealer has a customer who recently damaged his composite kayak and
would like an estimate of the cost to repair it. After the dealer
emailed pictures of the damage, Bill reviewed the pictures with the
repair technician and determined that the total materials charges
for the repair would be $100. Bill estimates that the job will take
3 labor hours to complete. Following is the budgeted cost data for
Current Designs:
Repair technician wages $30,000
Fringe benefits $10,000
Overhead $10,000
Current Designs has allocated 2,000 hours of repair
time for the upcoming year. The customer has agreed to transport
the kayak to the Winona production facility for the repairs.
Instructions
Determine the price that Current Designs would charge to complete
the repairs for the customer.
| Budgeted repair time for the year, in hrs. | 2000 | |
| Budgeted costs: | ||
| Repair technincian wages | 30000 | |
| Fringe benefits | 10000 | |
| Overhead | 10000 | |
| Total budgeted costs for the year of 2000 hrs. | 50000 | |
| Labor cost/hr. | 25 | |
| ($ 50000/2000 hrs.) | ||
| So, price estimate for the kayak repair | ||
| Labor cost | $ 25*3 hrs. | 75 |
| Cost of materials | 100 | |
| Total cost | 175 | |
| Add: Mark-up for: | ||
| Labor | $ 20* 3 hrs. | 60 |
| Materials | 100*50%= | 50 |
| Price to the customer | 175+110 | 285 |
| (Cost+mark-up for materials & labor time) |
MBA 6045 F1-01 - 2008 - Managerial Accounting Home Courses 2020 - August MBA6045F1012008 Topic 5...
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