Moravian College Operations And Supply Chain Management Assignment Help - Hannon Company

Question - Hannon Company makes swimsuits and sells these suits directly to retailers. Although Hannon has a
variety of suits, it does not make the All-Body suit used by highly skilled swimmers. The market
research department believes that a strong market exists for this type of suit. The department
indicates that the All-Body suit would sell for approximately $100. Given its experience, Hannon
believes the All-Body suit would have the following manufacturing costs.
Direct materials ……………… $ 25
Direct labor …………………….. 30
Manufacturing overhead ……….. 45
Total costs ……………………. $100

Instructions
...Read More (a) Assume that Hannon uses cost-plus pricing, setting the selling price 20% above its costs.
(1) What would be the price charged for the All-Body swimsuit?
(2) Under what circumstances might Hannon consider manufacturing the All-Body swimsuit given this
approach?
(b) Assume that Hannon uses target costing. W hat is the price that Hannon would charge the retailer
for the All-Body swimsuit?
(c) What is the highest acceptable manufacturing cost Hannon would be willing to incur to produce the
All-Body swimsuit, if it desired a profit of $20 per unit? ...Read Less

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