Question
Koto Photo manufactures cameras. At its Pacific Plant, cost control has become a concern of management. The actual costs per unit for 2018 and 2019
Koto Photo manufactures cameras. At its Pacific Plant, cost control has become a concern of management. The actual costs per unit for 2018 and 2019 were as follows
2018 2019
Direct materials $4,00 $3,80
Lens set $17,00 $17,20
Electrical component set $6,00 $5,40
Film track ; $12,00 $10,00
Direct labour ; $32,00(1,6 hrs) $30,00(1,5 hrs)
Indirect manufacturing cots;
Variable ; $8,00 $7,10
Fixed ; $2,00(100000 base) $1,90(120000 base)
The company manufactures all camera components except the lens sets which are furnished by several vendors.The company has used target costing in the past but has not been able to meet very competitive global pricing. Beginning of 2019, the company is implementing a continues improvement program that requires cost reduction targets.
Required:
(a)If Kaizen costing sets a first-year target of a 10% reduction of the 2018 base, how successful was the company in meeting 2019 per unit cost reduction targets? Support your answer with appropriate computation
(b)Write a report to the chairman of the company explaining the differences between target costing, kaizen costing and life-cycle costing.
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