Wilderness Products, Inc., has designed a self-inflating sleeping pad for use by backpackers and campers....
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Wilderness Products, Inc., has designed a self-inflating sleeping pad for use by backpackers and campers. The following information is available about the new product: a. An investment of $1,350,000 will be necessary to carry inventories and accounts receivable and to purchase some new equipment needed in the manufacturing process. The company's required rate of return is 24% on all investments. b. A standard cost card has been prepared for the sleeping pad, as shown below Standard Quantity or Hours Standard Standarod Cost $32.40 57.60 86.40 176.40 Price or Rate Direct materials Direct labor Manufacturing overhead (20% variable) Total standard cost per pad 12 yards 7.2 hours 7.2 hours s 2.70 per yard $ 8.00 per hour $12.00 per hour c. The only variable selling and administrative expense will be a sales commission of $8 per pad. The fixed selling and administrative expenses will be $4,564,320 per year d. Because the company manufactures many products, no more than 172,800 direct labor-hours per year can be devoted to production of the new sleeping pads e. Manufacturing overhead costs are allocated to products on the basis of direct labor-hours
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