Continues Case 5-46: meeting target costs To remain competitive, Axis Systems’ management believes the company must pro¬ duce Job B-type servers (from Decision Case 5-46) at a target cost of $5,400. Axis Systems has just joined a B2B e-market site that management believes will enable the firm to cut direct material costs by 10%. Axis’s management also believes that a value-engineering team can reduce assembly time.
Requirement Compute the assembly cost savings per Job B-type server required to meet the $5,400 target cost. {Hint: Begin by calculating the direct material, direct labor, and allocated activity cost per server.)