Saturday, September 10, 2011

A large hotel chain is currently expanding and has decided to decorate all new hotels using the rustic style

ACCOUNTING

Multiple Choice

Northwoods manufactures rustic furniture. The cost accounting system estimates manufacturing costs to be $90 per table, consisting of 80% variable costs and 20% fixed costs. The company has surplus capacity available. It is Northwoods’ policy to add a 50% markup to full costs.



A large hotel chain is currently expanding and has decided to decorate all new hotels using the rustic style. Northwoods Incorporated is invited to submit a bid to the hotel chain. What is the lowest price per unit Northwoods should bid on this long-term order?

a. $63

b. $72

c. $90

d. $135


Click here for the SOLUTION

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