Question
MaxiDrive manufactures a wide variety of parts for recreational boating, including a gear and driveshaft part for high-powered outboard boat engines. Original equipment manufacturers
MaxiDrive manufactures a wide variety of parts for recreational boating, including a 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 $655, and sales volume averages 28,000 units per year. Recently, MaxiDrive's major competitor reduced the price of its equivalent unit to $577. The market is very competitive, and MaxiDrive realizes it must meet the new price or lose significant market share. Management has begun paying closer attention to costs and has reconfirmed the current existing standard costs. The controller then assembled the following cost and usage data for the most recent year for MaxiDrive's production of 28,000 units: Budgeted Quantity Direct materials Direct labor Indirect labor Budgeted Cost $ 6,800,000 Actual Quantity Actual Cost 2,620,000 $ 7,300,000 2,775,000 2,620,000 2,550,000 Inspection (hours and cost) 1,040 360,000 1,300 380,000 Materials handling (number of purchases and cost) Machine setups (number and cost) 4,400 650,000 3,750 635,000 1,700 900,000 1,800 875,000 Returns and rework (number of times and cost) 360 110,000 560 160,000 $ 14,060,000 $ 14,675,000 Required: 1. Calculate the target cost for maintaining current market share and profitability. (Do not round intermediate calculations. Round your answer to 2 decimal places.) Target cost
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