Target Costing Laser Cast, Inc., manufactures color laser printers. The J20 model currently sells for $175 and has a total product cost of $140, as follows: 

Direct materials $100 

Direct labor 30 

Factory overhead 10 

Total $140 

The competitive selling price of laser printers is estimated to be a color of this type will drop to $170 next year. Laser Cast has established a target cost to maintain its historical profit margin percentage over product cost. 

Engineers have provided the following cost reduction ideas: 

Buy a snap-on plastic printer cover, instead of screws. This will reduce the amount of direct labor by 9 minutes per unit. 

Add an inspection step that will add six minutes per unit of direct labor but reduce material cost by $4 per unit. 

Reduce injection molding machine cycle time from four minutes to three minutes per part. 

Thirty percent of direct labor and 40% of factory overhead are related to running injection molding machines. The direct labor rate is $13 per hour. to. 

Required

Determine the target cost for the Model J20 assuming that the historical markup is maintained on the cost of the product and the selling price.

 Determine the cost reduction required. 

Evaluate the three engineering improvements together to determine if the required cost reduction (drift) can be achieved. 

. 1. Direct labor reduction  2. Additional inspection  3. Injection molding productivity improvement