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NEC Ltd. forms a Committee consisting of its Production, Marketing, and Finance Directors to prepare a budget for the next year. The Committee submits a draft budget as detailed below: Particulars ` Selling Price per unit 50 Less: Direct Material Cost per unit 9 Direct Labour Cost per unit 9Variable Overhead per unit (3 hrs. @ `2) 6 Contribution per unit 26 Budgeted Sales Quantity 25,000 units Budgeted Contribution (25,000 `26) 6,50,000 Less: Budgeted Fixed Cost 5,00,000 Budgeted Profit 1,50,000 The Management is not happy with the budgeted profit as it is almost equal to the previous year's profit. Therefore, it asks the Committee to prepare a budget to earn at least a profit of ` 3,00,000. To achieve the target profit, the Committee reports back with the following suggestions: The unit selling price should be raised to ` 55. The sales volume should be increased by 5,000 units. To attain the above said increase in sales, the company should spend ` 40,000 for advertising. The production time per unit should be reduced. To win the acceptance of the workers in this regard the hourly rate should be increased by ` 3 besides an annual group bonus of ` 30,000. There is no change in the amount and rates of other expenses. The company has sufficient production capacity. As the implementation of the above proposal needs the acceptance of the work force to increase the speed of work and to reduce the production time per unit, the Board wants to know the extent of reduction in per unit production time.

Required (i) CALCULATE the target production time per unit and the time to be reduced per unit. (ii) IDENTIFY the other problems that may arise in production due to decrease in unit production time and also suggest the remedial measures to be taken. (iii) STATE the most suitable situation for the adoption of Target Costing.