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 $630, and sales volume averages 26,500 units per year. Recently, MaxiDrive's major competitor reduced the price of its equivalent unit to $559. 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 26,500 units: Budgeted Quantity Actual Quantity Direct materials Direct labor Indirect labor Inspection (hours and cost) Materials handling (number of purchases and cost) Machine setups (number and cost) Returns and rework (number of times and cost) 980 3,950 1,550 330 Budgeted Cost $ 6,650,000 2,565,000 2,560,000 330,000 575,000 825,000 95,000 $13,600,000 1,150 3,600 1,650 530 Actual Cost $ 7,150,000 2,700,000 2,475,000 365,000 560,000 800,000 145,000 $14,195,000 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 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 $630, and sales volume averages 26,500 units per year. Recently, MaxiDrive's major competitor reduced the price of its equivalent unit to $559. 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 26,500 units: Budgeted Quantity Actual Quantity Direct materials Direct labor Indirect labor Inspection (hours and cost) Materials handling (number of purchases and cost) Machine setups (number and cost) Returns and rework (number of times and cost) 980 3,950 1,550 330 Budgeted Cost $ 6,650,000 2,565,000 2,560,000 330,000 575,000 825,000 95,000 $13,600,000 1,150 3,600 1,650 530 Actual Cost $ 7,150,000 2,700,000 2,475,000 365,000 560,000 800,000 145,000 $14,195,000 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
