1) Management at Kirkland Machine Tool Co. is considering the development of a new automated drill press called the Auto Drill. After conferring with the design engineers., the controller's staff assembled the following data about this project. Target selling price $ 7,500.00 per unit Desired profit percentage 25% of total unit cost Projected unit demand 4500 units Activity-based cost rates Materials handling activity 5% of raw materials and purchased parts cost $300 per unit for Auto Drill $50 per machine hour $570 per unit for Auto Drill $400 per unit for Auto Drill Engineering activity Production and assembly activity Delivery activity Marketing activity Per unit data Raw Materials cost $ 1,620.00 Purchased parts cost $ 840.00 Manufacturing labor hours 6 hours Hourly rate $ 14.00 Assembly labor hours 10 hours Hourly labor rate $ 15.00 Machine hours 30 hours A) Compute the product's Target cost. B) Compute the product's projected unit cost based on the design engineers estimates. C) should management produce and market the Auto Drill? Defend your answer.
1) Management at Kirkland Machine Tool Co. is considering the development of a new automated drill press called the Auto Drill. After conferring with the design engineers., the controller's staff assembled the following data about this project. Target selling price $ 7,500.00 per unit Desired profit percentage 25% of total unit cost Projected unit demand 4500 units Activity-based cost rates Materials handling activity 5% of raw materials and purchased parts cost $300 per unit for Auto Drill $50 per machine hour $570 per unit for Auto Drill $400 per unit for Auto Drill Engineering activity Production and assembly activity Delivery activity Marketing activity Per unit data Raw Materials cost $ 1,620.00 Purchased parts cost $ 840.00 Manufacturing labor hours 6 hours Hourly rate $ 14.00 Assembly labor hours 10 hours Hourly labor rate $ 15.00 Machine hours 30 hours A) Compute the product's Target cost. B) Compute the product's projected unit cost based on the design engineers estimates. C) should management produce and market the Auto Drill? Defend your answer.
Cornerstones of Cost Management (Cornerstones Series)
4th Edition
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Don R. Hansen, Maryanne M. Mowen
Chapter14: Quality And Environmental Cost Management
Section: Chapter Questions
Problem 6CE: Pinter Company had the following environmental activities and product information: 1. Environmental...
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