- Vaughn Company Manufactures Bicycles It Recently Received A Request To Manufacture 16 Units Of A Mountain Bike At A Pri 1 (243.7 KiB) Viewed 46 times
Vaughn
Company manufactures bicycles. It recently received a request to manufacture 16 units of a mountain bike at a price lower than it normally accepts. Joseph, the sales manager, indicated that, if the order were accepted at that price, the
company could expect additional orders from the same client. Joseph believes that, if Vaughn could offer this price in the market generally, sales of this bike would increase by 30%. Margaret, president of Vaughn, is skeptical about accepting the order. The
company has a policy of not accepting any order that does not provide a markup of 20% on full manufacturing costs. The price offered is $575 per bike. The controller, Sanjay, has recently researched the possibility of using activity-based multiple overhead rates instead of the single rate currently in use. He has promised more accurate estimated overhead product costing, and Margaret is curious about how this approach would affect product costing and pricing of the mountain bike. The plant-wide overhead rate is based on an estimated volume of 10,000 direct labour hours and the following budgeted overhead: Machine operating costs $124,500 Rework labour 46,800 Inspection 26,000 Scrap costs 36,000 General factory overhead 75,000 Total $308,300
Estimated activities for selected cost drivers for 2022: Machine hours 24,900 Units reworked 600 Inspection hours 500 Units scrapped 150 Direct labour hours 12,500 Estimated data for the production of one mountain bike: Direct materials $ 150 Direct labour (10 hours/unit) $ 170 Number of machine hours 6 Number of units reworked 0.25 Number of inspection hours 0.1 Number of units scrapped 0.05
(a 1) 1. Using the single-rate method to assign overhead on a plant-wide basis, calculate the normal selling price per mountain bike. (Round intermediate calculations and final answer to 2 decimal places, e.g. 15.25.) Normal selling price per mountain bike $ 2. Determine whether or not Vaughn should accept the order for the 16 mountain bikes. Vaughn should A the order for the 16 mountain bikes eTextbook and Media Save for Later Attempts: unlimited Submit Answer