Target costs, effect of product-design changes on product costs. Medical Instruments 1 2010 hatch-level costs manufactures many products. Io compute manufacturing costs, it uses an accounting system allocation rate, $9,325 with one direct-cost category (direct materials) and three indirect-cost categories:

1. Batch-related setup, production order, and material-handling costs, all which vary with the number of batches.

2. Manufacturing operations costs that vary with machine-hours.

3. Costs of engineering changes that vary with the number of engineering changes made.

In response to competitive pressures, product designers at Medical Instruments have employed value-engineering methods to reduce manufacturing costs. Actual information for 2010 and budgeted information for 2011 follow:

The management of Medical Instruments wants tq evaluate whether value engineering has succeeded in reducing the target cost per unit of one of its products, HJ6, by 12%. Actual data for 2010 and budgeted data for 2011 for HJ6 follow:

REQUIRED 1. Calculate the actual manufacturing cost per unit of HF6 in 2010.
2. Calculate the estimated manufacturing cost per unit of HF6 in 2011.
3. Did Medical Instruments achieve the target cost per unit for HF6?
4, Comment briefly on how Medical Instruments was able to reduce the estimated cost per unoif tHF 6 in 2011.LO1

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Actuals for 2010 Budgeted for 2011 Total setup, production order, and material-handling costs Total number of batches Total manufacturing operations costs Total quantity of machine-hours worked Total costs of engineering changes Total number of engineering changes $ 8,858,750 950 $15,255,000 226,000 $ 2,864,160 216 $ 9,200,000 1,000 $16,250,000 250,000 $ 2,500,000 200