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Incz Company recently began production of a new product, a digital clock, which required the investment of $1,600,000 in assets. The costs of producing and selling 80,000 units of the digital clock are estimated as follows: Inez Company is currently considering establishing a selling price for the clock. The president of Inez Company has decided to use the cost-plus appar product pricing and has indicated that the digital clock must earn a 105 rate of on invested assets. 1. Determine the amount of desired profit from the production and sale of the digital clock. 2. Assuming that the product cost concept is used, determine (a) the cost amount per unit, (b) the markup percentage, and (c) the selling price of the digital clock. 3. Under what conditions should Inez Company consider using activity-based costing rather than a single factory overhead allocation rate in allocating factory overhead to the digital clock? 4. Assume the market price for similar digital clocks was estimated at $38. Compute the reduction in manufacturing cost per unit needed to maintain the desired profit and existing selling and administrative expenses under target costing. Explain the consequences of the reduction in variables costs. 5. Assume that for the current year, the selling price of the digital clock was $42 per unit. To date, 60,000 units have been produced and sold, and analysis of the domestic market indicates that 15,000 additional units are expected to be sold during the remainder of the year. On August 7, 2014, Inez Company received an offer from Wong Inc. for 4,000 units of the digital clock at $28 each. Wong Inc. will market the units in Korea under its own brand name, and no selling and administrative expenses associated with the sale will be incurred by Inez Company. The additional business is not expected to affect the domestic sales of the digital clock, and the additional units could be produced during the current year, using existing capacity. Prepare a differential analysis dated August 7, 2014, to determine whether to reject (Alternative 1) or accept (Alternative 2 ) the special order from Wong

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