Universal Stuff Consolidated makes wooden children's toys.

lass Universal Stuff Consolidated makes wooden children's toys. The high-end toys are certified organic which increases the cost, but parents seem to like it. The company is considering a new set of less expensive toys that will not be organic or certified. USC has never produced these kind of toys before, but believes this is a tremendous opportunity to expand its business. The marketing team believe they can sell the toys for an average of $20 each and management has indicated a 15% profit would be required to get the product line approved. The product design team has come up with the following initial estimates for making the non-certified toys using existing manufacturing components and facilities $5.00 $3.00 $1.50 $1.00 Labor $1.00 $0.50 $2.00 $0.50 Overhead $1.50 $1.00 $3.00 $0.50 . Base frame assembly: Motor mounting Final assembly: . Packaging As the anticipated cost is too high, the design team has come up with the following ways to reduce cost: Outsource frame production. USC has a supplier that can provide similar parts, though not as good as the ones USC makes. The part would cost $5 and would only require $1 in overhead for handling Use lesser-quality motors. This would save 2/3's of the materials cost Outsource final assembly to Mexico. The assembly could be reduced to $3 per toy, but it would cost $1.50 in overhead per toy for shipping and handling. It should be noted management is concerned about losing the toys' "Made in America" status Find new ways to do the assembly to cut down labor time for all steps across the board by 50% Overhead would go down by 25% if these new methods are adopted . Required: a. Develop the target cost for the product b. Compute the current cost gap c. Choose among the options the design team has identified to close the cost gap d. Do you have any concerns about the value proposition of any of these options