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Theta Metalwork Inc. entered into an exclusive contract with an entity involved in franchising out artisanal candy stores. It will be producing a new design for a metal commercial rack based on the latter's needs. The latter is negotiating for a fixed-price on- demand ordering of the racks over five years. Theta gathered the following data shown in the image. How much should Theta sell each rack so that it can have a product profit margin of 28%? FIXED COSTS Research and Design Manufacturing Distribution Year 1 Year 2 Year 3 Year 4 Year 5 TOTALS P 200,000 P 30,000 P P 230,000 50,000 50,000 50,000 50,000 50,000 250,000 20,000 20,000 20,000 20,000 20,000 100,000 Customer Service 80,000 50,000 30,000 30,000 20,000 210,000 Other incremental operating costs 25,000 25,000 375,000 P 175,000 P 125,000 P 125,000 P 115,000 P 915,000 25,000 25,000 25,000 125,000 TOTALS VARIABLE COSTS PER UNIT Manufacturing 500 P 450 P 450 P 450 P 450 Distribution 100 100 100 100 100 Customer Service 50 50 50 50 50 TOTALS 650 P 600 P 600 P 600 P 600 UNITS TO BE SOLD AND PRODUCED 800 850 400 3,250 300 900

Theta Metalwork Inc. entered into an exclusive contract with an entity involved in franchising out artisanal candy stores. It will be producing a new design for a metal commercial rack based on the latter's needs. The latter is negotiating for a fixed-price on- demand ordering of the racks over five years. Theta gathered the following data shown in the image. How much should Theta sell each rack so that it can have a product profit margin of 28%? FIXED COSTS Research and Design Manufacturing Distribution Year 1 Year 2 Year 3 Year 4 Year 5 TOTALS P 200,000 P 30,000 P P 230,000 50,000 50,000 50,000 50,000 50,000 250,000 20,000 20,000 20,000 20,000 20,000 100,000 Customer Service 80,000 50,000 30,000 30,000 20,000 210,000 Other incremental operating costs 25,000 25,000 375,000 P 175,000 P 125,000 P 125,000 P 115,000 P 915,000 25,000 25,000 25,000 125,000 TOTALS VARIABLE COSTS PER UNIT Manufacturing 500 P 450 P 450 P 450 P 450 Distribution 100 100 100 100 100 Customer Service 50 50 50 50 50 TOTALS 650 P 600 P 600 P 600 P 600 UNITS TO BE SOLD AND PRODUCED 800 850 400 3,250 300 900

Principles of Cost Accounting
Principles of Cost Accounting
17th Edition
ISBN:9781305087408
Author:Edward J. Vanderbeck, Maria R. Mitchell
Publisher:Edward J. Vanderbeck, Maria R. Mitchell
Chapter10: Cost Analysis For Management Decision Making
Section: Chapter Questions
Problem 18E
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Theta Metalwork Inc. entered into an exclusive contract with an entity involved in franchising out artisanal candy stores. It will be producing a new design for a metal commercial rack based on the latter's needs. The latter is negotiating for a fixed-price on- demand ordering of the racks over five years. Theta gathered the following data shown in the image. How much should Theta sell each rack so that it can have a product profit margin of 28%? FIXED COSTS Research and Design Manufacturing Distribution Year 1 Year 2 Year 3 Year 4 Year 5 TOTALS P 200,000 P 50,000 30,000 P P 230,000 50,000 50,000 50,000 50,000 20,000 250,000 100,000 20,000 20,000 20,000 20,000 20,000 25,000 Customer Service 80,000 50,000 30,000 30,000 210,000 25,000 25,000 375,000 P 175,000 P 125,000 P 125,000 P 115,000 P 915,000 25,000 Other incremental operating costs TOTALS 25,000 125,000 VARIABLE COSTS PER UNIT Manufacturing 500 P 450 P 450 P 450 P 450 Distribution 100 100 100 100 100 Customer Service 50 50 50 50 50 TOTALS 650 P 600 P 600 P 600 P 600 UNITS TO BE SOLD AND PRODUCED 300 800 850 900 400 3,250
Transcribed Image Text:Theta Metalwork Inc. entered into an exclusive contract with an entity involved in franchising out artisanal candy stores. It will be producing a new design for a metal commercial rack based on the latter's needs. The latter is negotiating for a fixed-price on- demand ordering of the racks over five years. Theta gathered the following data shown in the image. How much should Theta sell each rack so that it can have a product profit margin of 28%? FIXED COSTS Research and Design Manufacturing Distribution Year 1 Year 2 Year 3 Year 4 Year 5 TOTALS P 200,000 P 50,000 30,000 P P 230,000 50,000 50,000 50,000 50,000 20,000 250,000 100,000 20,000 20,000 20,000 20,000 20,000 25,000 Customer Service 80,000 50,000 30,000 30,000 210,000 25,000 25,000 375,000 P 175,000 P 125,000 P 125,000 P 115,000 P 915,000 25,000 Other incremental operating costs TOTALS 25,000 125,000 VARIABLE COSTS PER UNIT Manufacturing 500 P 450 P 450 P 450 P 450 Distribution 100 100 100 100 100 Customer Service 50 50 50 50 50 TOTALS 650 P 600 P 600 P 600 P 600 UNITS TO BE SOLD AND PRODUCED 300 800 850 900 400 3,250
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