The Controller for Shutterbug Photographic Supply Has Established the Following

question 68

Essay

The controller for Shutterbug Photographic Supply has established the following cost pools and cost drivers:
An order for 1,200 boxes of film-development chemicals has the following production requirements: $$\begin{array}{l}\text { Machine setups }\\\begin{array} { l r } \text { Pounds of raw materials } & 16,000 \\\text { Pounds of hazardous chemicals } & \text { None } \\\text { Inspections } & 4 \\\text { Machine hours } & 400 \\\text { Direct materials and labor cost } & \$ 24,000\end{array}\end{array}$$
Shutterbug established a target price by adding a 40% markup to total manufacturing cost.
Required:
A. Determine the order's target price by using the activity-cost pools.
B. Assume that Halifax used a single, combined overhead rate based on weight of raw materials.
1. Determine the predetermined overhead rate.
2. Determine the expected cost of the order.
3. Determine the target price.
C. Which approach above ("A" or "B") seems to be a more reasonable method to establish target prices? Explain.

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Definitions:

Standardized Test

A test administered and scored in a consistent, or "standard", manner across different individuals or groups designed to measure various aspects of performance.

Norms

Socially accepted rules or standards of behavior that members of a group are expected to follow.

Heterosis

The phenomenon by which the offspring of two genetically distinct individuals exhibit qualities superior to the parents, commonly referred to as hybrid vigor.

Outbreeding

The practice of mating organisms from different populations or genetic backgrounds to increase genetic diversity and vigor.