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Hi John, Could you please let me know if my answer to the below problem is correct?
Hera Co is developing a new product using a target costing approach. The initial assumption was that a sales volume of 200,000 units could be achieved at a selling price of $25 per unit. However, market research indicates that to achieve the sales volume of 200,000 units, the selling price should be $23·50. Hera wishes to obtain an average profit margin of 20% on sales. The following data has been estimated for the product:
Direct material = $10·45 per unit
Hourly production volume = 20 units
Direct labour cost $64 per hour
Variable overheads $82 per hour (absorbed on a direct labour hour basis)
Fixed costs to produce 200,000 units are estimated to be $680,000.
What reduction in the cost per unit is required in order to achieve the target cost per unit (to the nearest two decimal places)?The solution I got is 2.35$
Hi John, The below question relates to ABC costing. I’m unable to edit the header. Could you please tell me how to solve this (workings)?
Themens Co uses activity based costing. The budgeted distribution costs for the next year are transport costs amounting to $2,631,200 and order processing costs amounting to $1,573,000.
It is estimated that in the next year, 325,000 orders will be processed and that the delivery vehicles will travel 1,495,000 km. A customer has indicated that 138 orders, each of which will require a journey of 122 km will be placed in the next year.
To the nearest two decimal places, what is the distribution cost for this customer?
Please do not simply type out a full question and expect to be provided with a full answer. You must have an answer in the same book in which you found the question, so ask about whatever it is in the answer that you are to clear about and then I will explain 🙂
(You cannot edit the headers, but please do in future start a new thread when asking about a different topic.)
Hi John,
Kind apologies. This question is from a test provided by my learning provider and it only had the final solution to it. I wanted to check where I went wrong in my workings/Steps. However, I revisited my working and have understood. Thank you 🙂
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