Question

Help I makes swimsuits and sells these suits directly to Leno Company swimmers. The market research department believes that a strong market exásts for this type of suit. The department indicates that the All-Body suit would sell for Although Leno has a variety of suits, it does not make the All-Body suit used by highly skilled Direct materials Direct labor $25 32 Total costs $103 Assume that Leno uses cost plus pricing, setting the selling price 20% above its costs what would be the price charged for the All Body swimsuit? (Round answer to 2 Assume that Leno uses target costing. What is the price that Leno would charge the retailer for the All-Body swimsuit? Selling price produce the What is the highest acceptable manufacturing cost Leno would be willing to incur to

Answer 1

Solution :-

(1). A company uses a cost plus pricing method when it desires the required profit margin about the costs regardless of the cost incurred.

Formula of cost plus pricing method is as follows :-

Cost-Plus- Pricing Method = Cost + Margin

= $103 + (20% × $103)

= $103 + $20.6

= $123.60

Therefore, the selling price is $123.60

(2). Target costing involves setting a target cost by minusing a desired profit margin from a competitive market price.

In this case, the amount of selling price will be $107

(3). Highly acceptable cost if cost is $107 and the desired profit is $25 per unit

Target cost = Market price - Selling price

= $107 - $25 = $82

Therefore, the target cost is $82