Ask Question, Ask an Expert

+1-415-315-9853

info@mywordsolution.com

Ask Basic Finance Expert

Four the past four years, three companies have dominated the soft drink industry, holding a combined 85 percent of market share. Wonder Cola Inc., ranks second nationally in soft drink sales. Its management is thinking about introducing a new low-caloric drink called Null Cola.

Wonder soft drinks are processed in a single department. All ingredients are added at the beginning of the process. At the end of the process, the beverage is poured into bottles that cost $0.24 per case produced. Direct labor and overhead costs are applied uniformly throughout the process.

Corporate controller Adam Daneen believes that costs for the cola will be very much like those for the company's Cola Plus drink. Last year, he collected the following data about Cola Plus:

Units* Costs
Work in process inventory
January 1 (!)------------------------- 2,200
Direct material costs--------------------------------------- $ 2,080
Concersion Costs------------------------------------------ 620
December 31 (!!) ---------------------- 2,000
Direct material costs--------------------------------------- 1,880
Conversion costs------------------------------------------ 600
Units started during year 458,500
Costs for year
Liquid material added-------------------------------------- 430,990
Direct labor and overhead--------------------------------- 229,400
Bottles--------------------------------------------------- 110,068

Each unit is a 24-bottle case.
(i) 50% complete = January
(ii) 60%complete = December

The company's variable general administration and selling costs are $1.10 per unit. Fixed administration and selling costs are assigned to products at the rate of $0.50 per unit. Each of Wonder Cola's two main competitors are already marketing a diet cola. Company A's product sells for $4.10 per unit; Company B's, for $4.05. All costs are expected to increase by 10 percent in the next three years. Wonder Cola tries to earn a profit of at least 15 percent on the total unit cost.

1. What factors should Wonder Cola Inc., consider in setting a unit selling price for a case of Null Cola?
2. Using the FIFO costing method, compute (a) equivalent units for direct materials, cases of bottles, and conversion costs; (b) the total production cost per unit; and (c) the total cost per unit of Cola Plus for the year.
3. What is the expected unit cost per unit of Cola Plus for the year?
4. Recommend a unit selling price range for Null Cola, and give the reason(s) for your choice.

Basic Finance, Finance

  • Category:- Basic Finance
  • Reference No.:- M926254

Have any Question? 


Related Questions in Basic Finance

You have just performed a scenario analysis on a project

You have just performed a scenario analysis on a project, with the following results: Best Case: with a 35% probability, you get an NPV of $77 Base Case: with a 55% probability, you get an NPV of $24 Worst Case: with a 1 ...

A very thin polymeric coating of thickness 01 mm uniformly

A very thin polymeric coating of thickness 0.1 mm uniformly coats a rectangular surface. The rectangular surface has a length of 20 cm and a width of 10 cm. the coating contains a solvent that must be evaporated away fro ...

What does the word sustainable mean in sustainable growth

What does the word sustainable mean in "sustainable growth model"? In what ways can the sustainable growth model highlight conflicts between a firm's competing objectives?

Your customer has a yoga studio when she started the

Your customer has a Yoga Studio. When she started the business, she got a loan for $5,000 to equip the studio. Interest is $75 per month and depreciation on the furnishing is $50 per month. She pays $1,000 per month in r ...

Why would an mnc consider examining only its lsquonet cash

Why would an MNC consider examining only its ‘net' cash flows in each currency when assessing its transaction exposure? Are currency correlations perfectly stable over time? What does your answer imply about using past d ...

In the summer of 2008 at heathrow airport in london

In the summer of 2008, at Heathrow airport in London, Bestofthebest (BB), a private company, offered a lottery to win a Ferrari or 108 comma 000British pounds, equivalent at the time to about $ 216 comma 000. Both the Fe ...

Results reported in the chapter show that by including

Results reported in the chapter show that by including either REITs or the NCREIF Index in a portfolio containing S&P 500 securities, corporate bonds, and T-bills, diversification benefits result. Why is this true? Do th ...

In randomized double-blind clinical trials of a new vaccine

In randomized, double-blind clinical trials of a new vaccine, monkeysmonkeys were randomly divided into two groups. Subjects in group 1 received the new vaccine while subjects in group 2 received a control vaccine. After ...

1 what concerns should an investor in a real estate

1. What concerns should an investor in a real estate syndication have regarding general partners? 2. What is the main difference between organizing a real estate venture as a corporation versus a general partnership? How ...

How do options on futures differ from options on the asset

How do options on futures differ from options on the asset underlying the futures? The open interest in a futures contract changes from day to day. Suppose that investors holding long positions are divided into two group ...

  • 4,153,160 Questions Asked
  • 13,132 Experts
  • 2,558,936 Questions Answered

Ask Experts for help!!

Looking for Assignment Help?

Start excelling in your Courses, Get help with Assignment

Write us your full requirement for evaluation and you will receive response within 20 minutes turnaround time.

Ask Now Help with Problems, Get a Best Answer

Section onea in an atwood machine suppose two objects of

SECTION ONE (a) In an Atwood Machine, suppose two objects of unequal mass are hung vertically over a frictionless

Part 1you work in hr for a company that operates a factory

Part 1: You work in HR for a company that operates a factory manufacturing fiberglass. There are several hundred empl

Details on advanced accounting paperthis paper is intended

DETAILS ON ADVANCED ACCOUNTING PAPER This paper is intended for students to apply the theoretical knowledge around ac

Create a provider database and related reports and queries

Create a provider database and related reports and queries to capture contact information for potential PC component pro

Describe what you learned about the impact of economic

Describe what you learned about the impact of economic, social, and demographic trends affecting the US labor environmen