RunAway is a local company that? custom-prints tech runningshirts for organized racing events. The...

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RunAway is a local company that? custom-prints tech runningshirts for organized racing events. The company has been inbusiness for 2 years. Normal demand for the tech running shirts isapproximately 650 shirts per event. On? average, there are twoevents per month. The company has the following direct costsper?shirt: Direct material (tech shirts) $5.00 Direct labor(printing) $0.60 Direct labor (design) $2.70 Total direct costs$8.30. The company has historically estimated selling price basedon the direct cost of providing the tech shirts. Prices reflected a30% desired profit margin above direct costs.? Recently, RunAwayhas experienced? lower-than-normal profits and suspects that theprices it is charging are not covering all costs? (direct and?indirect) of providing the tech shirts. Indirect costs of thecompany include depreciation on the printing machines andutilities. The following data from the most recent year relate tothese indirect? costs: Depreciation, Tech Shirts, Utilities Jan$800 620 $1306 Feb $800 760 $1538 March $800 990 $1887 April $8001250 $2000 May $800 1230 $1926 June $800 1390 $2148 July $800 1500$2050 Aug $800 1600 $2250 Sept $800 1340 $2034 Oct $800 1250 $1845Nov $800 1000 $1400 Dec $800 850 $1200 The management accountantestimates the following regression equation with utilities as thedependent variable and the number of tech shirts as theindependent? variable: y ?= $620 ?+ $1.03X
1. If monthly sales are 1,300 tech? shirts, what is the fullcost per tech? shirt??
box 1 (options: direct materials (tech shirts); direct labor(printing); Direct labor (design); fixed costs; total direct costs;variable utilities;) =
box 2 (options: direct materials (tech shirts); direct labor(printing); Direct labor (design); fixed costs; total direct costs;variable utilities;) =
box 3 (options: direct materials (tech shirts); direct labor(printing); Direct labor (design); fixed costs; total direct costs;variable utilities;) =
total full cost per tech shirt =
2. Why has RunAway been experiencing?lower-than-normal profits??(Round any interim currency calculations to the nearest cent andenter the profit margin percentage to the nearest whole? percent,X%.) Runaway has only been earning? a(n) -- ?% profit margin oneach tech shirt sold.?Profits are lower than normal because RunAwayhas not been aware of how the -- (choice option: design, direct,indirect,material, printing) costs have been affecting overallprofits. The decision to base prices on 30% markup of direct costshas been -- (effective or ineffective) in recovering all costs plusdesired profits related to providing the tech shirts.
3. What price must RunAway charge to recover all costs and earna 15% margin on all? sales? ?(Round to the nearest? cent.) RunAwaymust charge $--- to earn a 15% margin on all sales. D. Whatimplications will a potential price increase have on RunAway?and/or its? customers? How might the owners address any negativereactions from?customers? If RunAway increases its? price, they ---(choice option may lose, will gain, will not lose customers). Theowners of RunAway --- ((a)need not worry about communicating thereason for the increase to its customers, b) will need to carefullyapproach current customers and explain that current price increasewas necessary to cover all costs.)

Answer & Explanation Solved by verified expert

3.9 Ratings (466 Votes)

1 Direct Material 650000 13005 Direct Labor Printing 78000 130006 Direct Labor Design 351000 130027 Total Direct Costs 1079000 Indirect Costs 195900 6201300103 Total Costs 1274900 See Answer

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In: AccountingRunAway is a local company that? custom-prints tech runningshirts for organized racing events. The company...RunAway is a local company that? custom-prints tech runningshirts for organized racing events. The company has been inbusiness for 2 years. Normal demand for the tech running shirts isapproximately 650 shirts per event. On? average, there are twoevents per month. The company has the following direct costsper?shirt: Direct material (tech shirts) $5.00 Direct labor(printing) $0.60 Direct labor (design) $2.70 Total direct costs$8.30. The company has historically estimated selling price basedon the direct cost of providing the tech shirts. Prices reflected a30% desired profit margin above direct costs.? Recently, RunAwayhas experienced? lower-than-normal profits and suspects that theprices it is charging are not covering all costs? (direct and?indirect) of providing the tech shirts. Indirect costs of thecompany include depreciation on the printing machines andutilities. The following data from the most recent year relate tothese indirect? costs: Depreciation, Tech Shirts, Utilities Jan$800 620 $1306 Feb $800 760 $1538 March $800 990 $1887 April $8001250 $2000 May $800 1230 $1926 June $800 1390 $2148 July $800 1500$2050 Aug $800 1600 $2250 Sept $800 1340 $2034 Oct $800 1250 $1845Nov $800 1000 $1400 Dec $800 850 $1200 The management accountantestimates the following regression equation with utilities as thedependent variable and the number of tech shirts as theindependent? variable: y ?= $620 ?+ $1.03X1. If monthly sales are 1,300 tech? shirts, what is the fullcost per tech? shirt??box 1 (options: direct materials (tech shirts); direct labor(printing); Direct labor (design); fixed costs; total direct costs;variable utilities;) =box 2 (options: direct materials (tech shirts); direct labor(printing); Direct labor (design); fixed costs; total direct costs;variable utilities;) =box 3 (options: direct materials (tech shirts); direct labor(printing); Direct labor (design); fixed costs; total direct costs;variable utilities;) =total full cost per tech shirt =2. Why has RunAway been experiencing?lower-than-normal profits??(Round any interim currency calculations to the nearest cent andenter the profit margin percentage to the nearest whole? percent,X%.) Runaway has only been earning? a(n) -- ?% profit margin oneach tech shirt sold.?Profits are lower than normal because RunAwayhas not been aware of how the -- (choice option: design, direct,indirect,material, printing) costs have been affecting overallprofits. The decision to base prices on 30% markup of direct costshas been -- (effective or ineffective) in recovering all costs plusdesired profits related to providing the tech shirts.3. What price must RunAway charge to recover all costs and earna 15% margin on all? sales? ?(Round to the nearest? cent.) RunAwaymust charge $--- to earn a 15% margin on all sales. D. Whatimplications will a potential price increase have on RunAway?and/or its? customers? How might the owners address any negativereactions from?customers? If RunAway increases its? price, they ---(choice option may lose, will gain, will not lose customers). Theowners of RunAway --- ((a)need not worry about communicating thereason for the increase to its customers, b) will need to carefullyapproach current customers and explain that current price increasewas necessary to cover all costs.)