MaxiDrive manufactures a wide variety of parts for recreational boating, including a gear and driveshaft part...
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MaxiDrive manufactures a wide variety of parts for recreational boating, including a gear and driveshaft part for high-powered outboard boat engines. Original equipment manufacturers such as Mercury and Honda purchase the components for use in large, powerful outboards. The part sells for $686, and sales volume averages 31,500 units per year. Recently, MaxiDrive's major competitor reduced the price of its equivalent unit to $623. The market is very competitive, and MaxiDrive realizes it must meet the new price or lose significant market share. Management has begun paying closer attention to costs and has reconfirmed the current existing standard costs. The controller then assembled the following cost and usage data for the most recent year for MaxiDrive's production of 31,500 units: Budgeted Quantity Budgeted Cost Actual Quantity Actual Cost Direct materials Direct labor $ 7,150,000 2,765,000 $ 7,650,000 2,950,000 Indirect labor 2,760,000 Inspection (hours and cost) 1,180 430,000 1,650 Materials handling (number of purchases and cost) Machine setups (number and cost) 5,450 825,000 4,100 2,050 1,075,000 2,150 2,725,000 415,000 810,000 1,050,000 Returns and rework (number of times and cost) 430 145,000 630 195,000 $ 15,150,000 $ 15,795,000 Required: 1. Calculate the target cost for maintaining current market share and profitability. (Do not round intermediate calculations. Round your answer to 2 decimal places.) Answer is complete but not entirely correct. Target cost $ 417.95 X MaxiDrive manufactures a wide variety of parts for recreational boating, including a gear and driveshaft part for high-powered outboard boat engines. Original equipment manufacturers such as Mercury and Honda purchase the components for use in large, powerful outboards. The part sells for $686, and sales volume averages 31,500 units per year. Recently, MaxiDrive's major competitor reduced the price of its equivalent unit to $623. The market is very competitive, and MaxiDrive realizes it must meet the new price or lose significant market share. Management has begun paying closer attention to costs and has reconfirmed the current existing standard costs. The controller then assembled the following cost and usage data for the most recent year for MaxiDrive's production of 31,500 units: Budgeted Quantity Budgeted Cost Actual Quantity Actual Cost Direct materials Direct labor $ 7,150,000 2,765,000 $ 7,650,000 2,950,000 Indirect labor 2,760,000 Inspection (hours and cost) 1,180 430,000 1,650 Materials handling (number of purchases and cost) Machine setups (number and cost) 5,450 825,000 4,100 2,050 1,075,000 2,150 2,725,000 415,000 810,000 1,050,000 Returns and rework (number of times and cost) 430 145,000 630 195,000 $ 15,150,000 $ 15,795,000 Required: 1. Calculate the target cost for maintaining current market share and profitability. (Do not round intermediate calculations. Round your answer to 2 decimal places.) Answer is complete but not entirely correct. Target cost $ 417.95 X
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To calculate the target cost we need to subtract the reduction ... View the full answer
Related Book For
Cost management a strategic approach
ISBN: 978-0073526942
5th edition
Authors: Edward J. Blocher, David E. Stout, Gary Cokins
Posted Date:
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