Question
DC Inc. manufactures large workbenches for industrial use. Recently, DC's sales have been declining because of aggressive pricing by competitors. DC's workbench sells for $850
DC Inc. manufactures large workbenches for industrial use. Recently, DC's sales have been declining because of aggressive pricing by competitors. DC's workbench sells for $850 compared to competitor's price of $810 for a comparable workbench.
Cost data based on sales of 13,000 workbenches:
| Actual Quantity | Actual Cost | |
| Direct Materials (pounds) | 168,000 | $3,450,000 |
| Direct Labor (hours) | 71,500 | 1,410,000 |
| Machine setups (# of setups) | 880 | 250,0000 |
| Mechanical assembly (machine hours) | 281,250 | 3,730,000 |
a. Calculate DC's current profit per unit
b. If DC reduces the price to the market price of $810 per workbench, what is DC's necessary target cost per unit to achieve the current profit margin percentage?
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Auditing And Assurance Services An Integrated Approach
Authors: Arens, Elder, Beasley
9th Edition
0130646202, 9780130646200
