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11. JCS Enterprises produces televisions. Each TV presently sells for $1,200 and has a product cost of $900, as follows: Direct materials Direct labor Factory
11. JCS Enterprises produces televisions. Each TV presently sells for $1,200 and has a product cost of $900, as follows: Direct materials Direct labor Factory overhead Total $300 $470 $130 $900 It is estimated that the competitive selling price for TVs of this type will drop to $1,000 next year. JCS has established a target cost to maintain its historical markup percentage on product cost. Engineers have provided the following cost-reduction ideas: 1. Purchase a glass front with glue-on technology, rather than screws. This will reduce the amount of direct labor by 10 minutes per unit. 2. Add an inspection step that will add 10 minutes per unit of direct labor but reduce the materials cost by $30 per unit. 3. Decrease the cycle time of the robotic machine from 20 minutes to 12 minutes per part. Fifty percent of direct labor and sixty percent of the factory overhead are related to this robotic machine process. The direct labor rate is $25 per hour. a. Determine the historical markup on product cost. b. Determine the required cost reduction. Evaluate the three improvements together to determine if the required cost reduction can be achieved
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