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Chapter 19: Q.19-11SE (page 1067)

Refer to Short Exercise S19-10. Haworth desires a 20% target operating income after covering all costs. Considering the total costs assigned to the Client 76 job in Short Exercise S19-10, what would Haworth have to charge the customer to achieve that operating income? Round to two decimal places.

Short Answer

Expert verified

For targeted operating income service charge should be $20,343.75

Step by step solution

01

Calculation of cost percent to service charge

Targeted operating income is 20%

So, the cost to sales percent should be

cost-salespercent=100-operatingincomepercent=100-20=80%

02

Calculation of service charge

servicecharge=totalcostcost-salesspercent=$16,2750.8=$20,343.75

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Most popular questions from this chapter

Explain how the work cell manufacturing layout increases productivity.

Consider the following characteristics of either a JIT production system or a traditional production system. Indicate whether each is characteristic of a JIT production system or a traditional production system.

a. Products are produced in large batches.

b. Large stocks of finished goods protect against lost sales if customer demand ishigher than expected.

c. Suppliers make frequent deliveries of small quantities of raw materials.

d. Employees do a variety of jobs, including maintenance and setups as well as operating machines.

e. Machines are grouped into self-contained production cells or production lines.

f. Machines are grouped according to function. For example, all cutting machines are located in one area.

g. The final operation in the production sequence “pulls” parts from the preceding operation.

h. Each employee is responsible for inspecting his or her own work.

i. Management works with suppliers to ensure defect-free raw materials.

Goodwin, Inc. manufactures children’s sandals. Similar sandals manufactured by competitors sell for $12.50 per pair. Goodwin desires a 20% net profit margin. What is Goodwin’s target cost?

Question:Refer to Exercise E19-26. Western desires a 20% target net profit after covering all costs. Considering the total costs assigned to the Halbert engagement in Exercise E19-26, what would Western have to charge the customer to achieve that net profit? Roundto two decimal places.

PetSmart, Inc. is a large specialty pet retailer of services and solutions for the needs of pets. In addition to selling pet food and pet products, PetSmart also offers dog grooming services including bath, nail trim, teeth brushing, aromatherapy to reduce everyday stress, and nail polish and stickers. PetSmart even offers a Top Dog service that includes a premium shampoo, milk bath conditioner, scented cologne spritz, teeth brushing, and bandana or bow.

Assume PetSmart, Inc. expects to incur \(380,000 of indirect costs this year. The company allocates indirect costs based on the following activities:

___________________________________________________________________

Activity Estimated Allocation Base Estimated Quantity

Cost of Allocation

Base____

Admission \) 60,000 Number of admissions 20,000

Cleaning 240,000 Cleaning direct labor hours 100,000

Grooming 80,000 Grooming direct labor hours 4,000

Total indirect costs $ 380,000________________________________________

Requirements

3. If PetSmart desires a 30% target operating income after covering all its costs, what would PetSmart have to charge the customer to achieve that operating income?
See all solutions

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