P25-4A Continuing Problem 25-3A. Camden controller Sandra Whitney is surprised that A ABC reports such a higher indirect production cost per travel pack. She wonders whether g Camden is making the desired profit of $1.25 per unit on this product. The current sale price ( is $5.75 per travel pack, direct production costs are $2.15 per pack, marketing and distribution costs are $0.90 per pack, and the indirect production costs are $1.70 per pack (from Problem 25-3A). Whitney believes that to reach estimated sales of 50,000 units, the sale price cannot exceed $5.75. If the travel pack is not providing the desired profit of $1.25 per unit, Whitney decides that the next step should be to establish a cross-functional value engineering team to identify opportunities for cost savings. If this does not provide the desired profit, Whitney doubts it will be possible to increase market share to sales of 50,000 travel packs. Required 1. Determine the sale price that yields a profit of $1.25 per travel pack. Does this meet the $5.75 target price? 2. Whitney establishes a value engineering team. The value engineering team finds that improved supply-chain management can cut the travel pack's direct production costs from $2.15 per pack to $2.03 per pack. Further, the team believes it can cut materials- handling costs from $180,000 to $171,000. Changes in the packaging department will save $76,000 in packaging costs and 400 in machine hours. Improvements to quality assurance should reduce costs to $107.500 based on 2,150 samples. Marketing and distri- bution costs will remain unchanged. Given these cost savings, compute the indirect activity cost allocation rates for materials handling, packaging, and quality assurance? 3. If the value engineering team's suggestions are implemented, the travel pack line would require 4,000 kilos, use 180 machine hours, and require 256 samples. Compute the new indirect production cost per travel pack (including all three activities). 4. With these changes, can Camden set a sale price of $5.75 and still earn a profit of $1.25 per travel pack?