Morrow Corporation Manufactures Part No Morrow Has Traditionally Used a 20% Markup on Total Cost

question 82

Essay

Morrow Corporation manufactures part no. 67, which is used in the production of mountain bikes. Per-unit information about part no. 67 follows. $\begin{array}{lr}\text { Prevailing market price } & \$ 33 \\\text { Direct materials } & 14 \\\text { Direct labor } & 6 \\\text { Manufacturing overhead } & 7 \\\text { Selling and administrative expenses } & 3\end{array}$
Morrow has traditionally used a 20% markup on total cost to arrive at a reasonable selling price. The company, though, has noticed a sizable drop in sales volume during the last few quarters, which it attributes to new entrants in the marketplace.
Required:
A. Compute the current selling price of part no. 67.
B. If management desired to meet the prevailing market price and maintain the current rate of profit on sales, what must happen to the company's total manufacturing costs? By how much?

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Definitions:

Onscreen Journal

A digital record or interface where financial transactions are entered and stored electronically.

Template Name

The designated title given to a predefined format or structure used for documents, spreadsheets, or databases, aiding in standardizing the creation of new instances.

Reminder

A tool or alert designed to notify someone of an upcoming event, due date, or task.

Scheduled Transactions

Transactions that have been arranged to occur at a specific, predetermined time, such as automated bill payments or regular financial transfers.