Target Costing

Laser Impressions Inc. manufactures color laser printers. Model $320$ presently sells for $$700$ and has a product cost of $$560,$ as follows:

Direct materials

$$400$

Direct labor

$110$

Factory overhead

Total

Engineers have provided the following cost$-$reduction ideas:

Purchase a plastic printer cover with snap$-$on assembly, rather than with 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 the materials cost by $$14$ per unit.

machines.

The direct labor rate is $$46$ per hour.

a$.$ Determine the target cost for Model J$20,$ assuming that the historical markup on product cost and selling price are maintained. Round your final answer to two decimal places.

$

$$ per unit

b$.$ Determine the required cost reduction. Round your final answer to two decimal places.

Direct labor reduction

$

$

$

$

per unit

Additional inspection

Injection molding productivity improvement

Total savings