Purchase Solution

Cost Accounting

Not what you're looking for?

Ask Custom Question

Allied Laboratories is combining some of its most common tests into one-price packages.

One such package will contain three tests that have the following variable costs:
Test A Test B Test C
Disposable syringe $3.00 $3.00 $3.00
Blood vial 0.50 0.50 0.50
Forms 0.15 0.15 0.15
Reagents 0.80 0.60 1.20
Sterile bandage 0.10 0.10 0.10
Breakage/losses 0.05 0.05 0.05

When the tests are combined, only one syringe, form, and sterile bandage will be used.
Furthermore, only one charge for breakage/losses will apply. Two blood vials are required and reagent costs will remain the same (reagents are required for all three tests).

a. As a starting point, what is the price of the combined test assuming marginal cost pricing?

b. Assume that Allied wants a contribution margin of $10 per test. What price must be set to achieve this goal?

c. Allied estimates that 2,000 of the combined tests will be conducted during the first year. The annual allocation of direct fixed and overhead costs total $40,000.
What price must be set to cover full costs? What price must be set to produce a profit of $20,000 on the combined test?

Purchase this Solution
Solution Summary

The solution explains calculations relating to contribution margin, incremental costs, breakeven

Solution Preview

a. Marginal cost is the total variable cost. The total variable cost is
1 syringe $3.00
2 vials 1.00 (0.50 X 2)
1 form 0.15
3 reagents 2.60 (0.80+0.60+1.20)
1 bandage 0.10
1 ...

Purchase this Solution
Free BrainMass Quizzes
Organizational Leadership Quiz

This quiz prepares a person to do well when it comes to studying organizational leadership in their studies.

Academic Reading and Writing: Critical Thinking

Importance of Critical Thinking

Introduction to Finance

This quiz test introductory finance topics.

Writing Business Plans

This quiz will test your understanding of how to write good business plans, the usual components of a good plan, purposes, terms, and writing style tips.

SWOT

This quiz will test your understanding of the SWOT analysis, including terms, concepts, uses, advantages, and process.

View More Free Quizzes
Related BrainMass Solutions

  • Relevance of Cost Accounting

    532384 Relevance of Cost Accounting Discuss the relevance of cost accounting as it relates to the accounting profession in general. Relate to something you learned while working toward your accounting profession.

  • Cost accounting vs financial accounting

    534822 Cost accounting vs financial accounting The General Manager of a company has decided to employ a cost accountant.

  • Cost vs Financial Accounting

    When is cost accounting valuable to an organization? Does cost accounting differ from financial accounting? If so, how? When is cost accounting valuable to an organization? Where is cost accounting information stored and maintained?

  • Cost Accounting and Applications

    270781 Cost Accounting and Applications What is cost accounting and how do we best use it? Question What is cost Accounting and how do we best use it?

  • Cost Accounting and Other Types of Accounting

    519520 Cost Accounting and Other Types of Accounting Discuss how cost accounting differs from other types of accounting. Provide specific examples to support your response.

  • Managerial versus Financial Accounting

    Although often associated with manufacturing or process costing, cost accounting can be used in most any business. The real benefits of cost accounting are cost savings.

  • cost accounting value to an organization

    104578 cost accounting value to an organization 1. Does cost accounting differ from financial accounting? If so, how? When is cost accounting valuable to an organization? Where is cost accounting information stored and maintained? 2.

  • An Explanation of Cost Accounting

    198743 An Explanation of Cost Accounting Please address the following question: Explain the characteristics and purposes of cost accounting?

  • Ethical standards exist in accounting

    62911 Ethical standards that exist in accounting Why do ethical standards exist in accounting? What role does the cost principle play in Accounting? I just need a better understanding and a 2nd opinion on this matter.

  • Cost Accounting: Benefits

    Cost accounting: a managerial emphasis. Pearson Higher Education AU, 2013. 2. DRURY, COLIN M. Management and cost accounting. Springer, 2013. The answer to this problem explains the benefits and gains from the cost accounting course.

View More Related Solutions