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 such
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 $675, and sales volume averages 29,500 units per year. Recently, MaxiDrives major competitor reduced the price of its equivalent unit to $604. 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 MaxiDrives production of 29,500 units: Budgeted Quantity Budgeted Cost Actual Quantity Actual Cost Direct materials $ 6,950,000 $ 7,450,000 Direct labor 2,685,000 2,850,000 Indirect labor 2,680,000 2,625,000 Inspection (hours and cost) 1,100 390,000 1,450 395,000 Materials handling (number of purchases and cost) 4,850 725,000 3,900 710,000 Machine setups (number and cost) 1,850 975,000 1,950 950,000 Returns and rework (number of times and cost) 390 125,000 590 175,000 $ 14,530,000 $ 15,155,000 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.)
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