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 $692, and sales volume averages 33,000 units per year. Recently, MaxiDrives major competitor reduced the price of its equivalent unit to $641. 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 33,000 units:

	Budgeted Quantity	Budgeted Cost	Actual Quantity	Actual Cost
Direct materials		$ 7,300,000		$ 7,800,000
Direct labor		2,720,000		3,025,000
Indirect labor		2,820,000		2,680,000
Inspection (hours and cost)	1,240	460,000	1,800	430,000
Materials handling (number of purchases and cost)	5,900	900,000	4,250	885,000
Machine setups (number and cost)	2,200	1,150,000	2,300	1,125,000
Returns and rework (number of times and cost)	460	160,000	660	210,000
		$ 15,510,000		$ 16,155,000

Required:

1. Calculate the target cost for maintaining current market share and profitability.

2.

Waymouth Manufacturing operates a contract manufacturing plant located in Dublin, Ireland. The plant provides a variety of electronics products and components to consumer goods manufacturers around the world. Cycle time is a critical success factor for Waymouth, which has developed a number of measures of manufacturing speed. Waymouth has studied the matter and found that competitive contract manufacturers have manufacturing cycle times (MCE) of about 32%. When last calculated, Waymouths MCE was 25%.

Key measures from the recent months production, averaged over all the jobs during that period, are as follows:

Activity	Average Time (hours)
New product development	10.0
Materials handling	2.0
Order setup	1.0
Machine maintenance	1.5
Order scheduling	11.0
Inspection of completed order	3.5
Pack and move to storage or ship	1.0
Manufacturing assembly	4.0
Order taking and checking	0.5
Receiving and stocking raw materials	1.0
Inspection of raw materials at start of production	2.5

Required:

Determine the manufacturing cycle efficiency (MCE) for the recent month.

3.

Matt Simpson owns and operates Quality Craft Rentals, which offers canoe rentals and shuttle service on the Nantahala River. Customers can rent canoes at one station, enter the river there, and exit at one of two designated locations to catch a shuttle that returns them to their vehicles at the station they entered. Following are the costs involved in providing this service each year:

	Fixed Costs	Variable Costs
Canoe maintenance	$ 3,150	$ 8.00
Licenses and permits	3,850	0
Vehicle leases	6,250	0
Station lease	7,770	0
Advertising	6,850	6.00
Operating costs	21,850	6.00

Quality Craft Rentals began business with a $26,500 expenditure for a fleet of 30 canoes. These are expected to last 10 more years, at which time a new fleet must be purchased. Rentals have been stable at about 6,700 per year.

Required:

Matt is happy with the steady rental average of 6,700 per year. For this number of rentals, what price should he charge per rental for the business to make an annual 15% before-tax return on assets using life-cycle costs?