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 13.31P
Cost-plus and market-based pricing. Georgia Temps, a large labor contractor, supplies contract labor to building-construction companies. For 2017, Georgia Temps has budgeted to supply 84,000 hours of contract labor. Its variable costs are $13 per hour, and its fixed costs are $168,000. Roger Mason, the general manager, has proposed a cost-plus approach for pricing labor at full cost plus 20%.
- 1. Calculate the price per hour that Georgia Temps should charge based on Mason’s proposal.
- 2. The marketing manager supplies the following information on demand levels at different prices:
| Price per Hour | Demand (Hours) |
| $16 | 124,000 |
| 17 | 104,000 |
| 18 | 84,000 |
| 19 | 74,000 |
| 20 | 61,000 |
Georgia Temps can meet any of these demand levels. Fixed costs will remain unchanged for all the demand levels. On the basis of this additional information, calculate the price per hour that Georgia Temps should charge to maximize operating income.
- 3. Comment on your answers to requirements 1 and 2. Why are they the same or different?
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Students have asked these similar questions
Cost-plus and market-based pricing. Georgia Temps, a large labor contractor, supplies contract labor to building-construction companies. For 2017, Georgia Temps has budgeted to supply 84,000 hours of contract labor. Its variable costs are $13 per hour, and its fixed costs are $168,000. Roger Mason, the general manager, has proposed a cost-plus approach for pricing labor at full cost plus 20%.
Cullumber Corporation is in the process of setting a selling price for a recently designed product. The following data relate to this
product at a budgeted volume of 60,000 units.
Direct materials
Direct labor
Variable manufacturing overhead
Fixed manufacturing overhead
Variable selling and administrative expenses
Fixed selling and administrative expenses
(a1)
Your answer is correct.
Total unit variable cost $
Total unit fixed cost
Total unit cost
eTextbook and Media
(a2)
Cullumber uses cost-plus pricing to set its target selling price and has a markup on total unit cost of 30%.
Per Unit
$
Desired ROI per unit $
$30
Compute total unit variable cost, total unit fixed cost, and total unit cost for the new product.
$
40
10
6
86
Total
69
$2,220,000
155
1,920,000
Compute desired ROI per unit for the new product. (Round answer to 2 decimal places, e.g. 5.27.)
Attempts: 1 of 5 used
Georgia Temps, a large labor contractor, supplies contract labor to building-construction companies. For 2017, Georgia Temps has budgeted to supply 84,000 hours of contract labor. Its variable costs are $13 per hour, and its fixed costs are $168,000. Roger Mason, the general manager, has proposed a cost-plus approach for pricing labor at full cost plus 20%.
Q. Calculate the price per hour that Georgia Temps should charge based on Mason’s proposal.
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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