13-28 Target Costing MaXiDrive manufactures a wide variety of parts for recreational boating, includinga 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 $610, and sales volume averages 25,000 units per year. Recently, MaxiDrive's major competitor reduced the price of its equivalent unit to $550. The market is very competitive, and Maxi-Drive realizes it must meet the new price or lose significant market share. The controller has assembled these cost and usage data for the most recent year for MaxiDrive's production of 25,000 units: Budgeted Quantity Materials Direct labor Indirect labor Inspection (hours and cost) 920 Materials handling (number of purchases and cost) 3,500 Machine setups (number and cost) 1,400 Returns and rework (number of times and cost) 300 Budgeted Cost $ 6,500,000 2,500,000 2,500,000 300,000 500,000 750,000 80,000 31 3,1 30,000 Actual Quantity 1 ,000 3,450 1 ,500 500 Actual Cost 5 7,000,00! 2,625.00! 2,400,00! 350,00! 485,00! 725,00! 130,00! 313,71 5,00