Accounting 102 CH8

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Author:
acelaker
ID:
144794
Filename:
Accounting 102 CH8
Updated:
2012-04-04 15:31:50
Tags:
Acounting 102
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Description:
CH8
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  1. Target Cost
    Market Price - Desired Profit
  2. Return on investment (ROI)
    • Net income ÷ Invested assets
    • ex: 1mil invst expt rnt 20% 1mil*.20=200K
    • 10K units produced 200K÷10K=$20 per unit
  3. Target Selling Price
    • Cost + (Markup % x Cost) or
    • cost + ROI
  4. Target Selling Price perU
    • Total Unit Cost + (Totl Unt Cst x markup%) or
    • total cost per unit + ROI per unit
  5. Markup Percentage
    Desired ROI perU ÷ Total Cost PerU
  6. Time and material pricing
    • 1) calculate the per hour labor charge rate
    • (2) calculate the charge for obtaining and holding materials %
    • (3) calculate the charges for a particular job
  7. T/M Caluclate Labor Charge
    • (1) DL cost of emplye, incldg hrly rt or salary & fringe benefits
    • (2)selling, administrative, and similar overhead costs
    • (3) an allownce for desired profit or ROI p/hr of emplye time
    • ex: $103K (mec wages)÷10K hrs (total hrs) = 10.3 (add all)
  8. TM Calculate Material Loading Charge
    • (1) Est totl ann csts for purch, recv, hndl, & storing materials.
    • (2) divides this amount by the totl est cst of parts and materials.
    • (3) It adds a desired profit margin on the materials themselves
    • ex: $13K (matrl chg) ÷ $130K = 10% (add all)
  9. TM Calculate Charges for a paticular job
    • (1) the labor charge
    • (2) the charge for the materials
    • (3) the material loading charge
    • ex: 12 hrs x $50 rate + $500 mat+($500 x 10%rate)
  10. Possible approaches for determining a transfer price:
    • 1. Negotiated transfer prices.
    • 2. Cost-based transfer prices.
    • 3. Market-based transfer prices.
  11. Contrubution Margin (AKA Opportunity Cost)
    Selling Price - Variable Price
  12. Min Transfer Price No Excess Capacity
    Variable Cost + Opportunity Cost (AKA Cont Margin)
  13. Min Transfer Price Excess Capacity
    Variable Cost + $0 Opportunity Cost
  14. Absorption cost pricing (GAAP aprvd)
    • 1) Compute Unit manufacturing costs
    • 2) Compute Markup Percentage using formula:
    • Dsrd ROI pu+Selling/Admin Exp pu=Markup% x Mfg cost pu
    • 3) Set target selling price using formula:
    • Mfg cost pu + (markup% x Mfg cost pu)
  15. Variable Cost Pricing
    • 1) Compute unit variable cost
    • 2) Compute Markup Percentage using formula:
    • Dsrd ROI + Fxd Cost pu = Markup% x Variable Cost pu
    • 3) Set target selling price using formula:
    • Var Cost pu + (Markup% x Var Cost pu)

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