【正文】 ot want to indicate that his services are inferior to those provided by others. If he does accounting work for free, for example, he should be careful to choose work for a notforprofit agency (., the local United Way), or he should make additional work contingent on pricing closer to $65 per hour. 430 19–3 1. Markup percentage = $3,930,000/$19,650,000 = , or 20% 2. Bid = $980,000 + ()($980,000) = $1,176,000 Baker should remind the customer that the 20% markup on direct costs is not pure profit. It includes overhead as well. In this industry, 20% overhead plus profit is not out of line. 19–4 1. The markup percentage of 100% is typical for department stores. It must cover all costs of storing and selling the goods, including salaries of sales personnel。 (c) workers on the Loser line are learning new technology with spillover benefits for all products。 and easy entry into and exit from the industry. Commodity markets for agricultural products such as wheat, soybeans, and pork bellies are close to perfectly petitive. Similarly, gas stations in a city face petitive conditions. A gas station may try to differentiate itself to move to a more monopolistically petitive situation. For example, it might offer car washes, certain grocery staples, or full service. 2. The markup percentage on cost of goods sold is equal to selling and administrative expense plus desired operating ine divided by cost of goods sold. The markup is not pure profit because it includes selling and administrative expense. 3. Target costing is a method of determining the cost of a product or service based on the price that customers are willing to pay. In essence, target costing is price driven. Once the target price is determined, the cost is calculated by subtracting desired profit from price. The remainder is the target cost. 4. Peration pricing is the pricing of a new product at a low initial price, perhaps even lower than cost, to build market share quickly. Price skimming is a pricing strategy in which a higher price is charged at the beginning of a product’s life cycle and then lowered at later phases of the life cycle. 5. There are a number of possible reasons。 a homogeneous product (one pany’s product is virtually identical to any other pany’s product)。 (b) Loser is projected to begin making a profit in a year or so。 they average $65 per hour for a reason—clients will not pay much more than that amount. Accounting is a monopolistically petitive industry. There are many accountants, but they vary somewhat in age, experience, and preferred type of work (auditing, tax, management advisory services, inhouse bookkeeping for clients, etc.). As a result, the price will not vary greatly among the firms. Since Amin is new in town, he might adopt a peration pricing strategy. He is in the introduction stage of his ―service life cycle.‖ He needs to get some clients so that he can demonstrate his expertise and start some favorable ―word of mouth‖ advertising of his services. His college GPA will be irrelevant to potential clients。 hangers and racks for display。 hiring carpenters and locating subcontractors。 and so on. 4. The direct labor rate charged includes overhead and profit on labor. (No doubt the materials price also includes some profit on the purchase and sale of materials.) The overhead embedded in the direct labor price includes payroll taxes for the mechanics, supplies (., rags, grease), small and large tools, garage space, utilities, and so on. 19–5 1. a. b. Absorption unit cost: Variable unit cost: Direct materials ............. $ Direct materials ............ $ Direct labor..................... Direct labor.................... Variable overhead ........ Variable overhead ....... Fixed overhead ............. Total.......................... $ 431 Total .......................... $ 432 19–5 Continued 2. Vaquero, Inc. AbsorptionCosting Ine Statement Sales (21,300 $35)....................................................... $ 745,500 Cost of goods sold (21,300 $) ....................... $ 479,250 Less: Overapplied overhead* ...................................... (7,000) 472,250 Gross margin ............................................................. $ 273,250 Less: Selling and administrative expense................ 186,900 Net ine ................................................................. $ 86,350 *The budgeted fixed overhead rate of $9 per direct labor hour was puted based on 12,000 direct labor hours. Therefore, budgeted fixed overhead must have been $108,000. Since actual fixed overhead was $12,000 less than budgeted, actual fixed overhead must be $96,000. Similarly, the variable overhead rate of $6 per direct labor hour implies budgeted variable overhead of $72,000 ($6 12,000 direct labor hours). Since actual variable overhead was $5,000 higher than budgeted overhead, actual variable overhead must be $77,000. Both variable and fixed overhead were applied on the basis of direct labor hours. Since 12,000 hours were worked, total applied overhead amounts to $180,000. Actual overhead was $173,000 (actual fixed of $96,000 plus actual variable of $77,000). Applied overhead ............................... $ 180,000 Actual overhead.................................. (173,000) Overapplied overhead................ $ 7,000 3. Vaquero, Inc. VariableCosting Ine Statement Sales (21,300 $35)....................................................... $ 745,500 Variable cost of goods sold (21,300 $18) ............. $ 383,400 Add: Overapplied variable overhead ......................... 5,000 (388,400) Variable selling expense (21,300 $3) ..................... (63,900) Contribution margin .........