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 $688, and sales volume averages 32,000 units per year. Recently, MaxiDrive's major competitor reduced the price of its equivalent unit to $628. 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 32,000 units: 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) Budgeted Quantity Target cost 1,200 5,600 2,100 440 Budgeted Cost $ 7,200,000 2,750,000 2,780,000 440,000 850,000 1,100,000 150,000 $ 15,270,000 Actual Quantity 1,700 4,150 2,200 640 Actual Cost $ 7,700,000 2,975,000 2,710,000 420,000 835,000 1,075,000 200,000 $ 15,915,000 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.)
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 $688, and sales volume averages 32,000 units per year. Recently, MaxiDrive's major competitor reduced the price of its equivalent unit to $628. 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 32,000 units: 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) Budgeted Quantity Target cost 1,200 5,600 2,100 440 Budgeted Cost $ 7,200,000 2,750,000 2,780,000 440,000 850,000 1,100,000 150,000 $ 15,270,000 Actual Quantity 1,700 4,150 2,200 640 Actual Cost $ 7,700,000 2,975,000 2,710,000 420,000 835,000 1,075,000 200,000 $ 15,915,000 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.)
Cornerstones of Cost Management (Cornerstones Series)
4th Edition
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Don R. Hansen, Maryanne M. Mowen
Chapter16: Cost-volume-profit Analysis
Section: Chapter Questions
Problem 39P
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Transcribed Image Text: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 $688, and sales volume averages 32,000 units per year. Recently, MaxiDrive's major competitor
reduced the price of its equivalent unit to $628. 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
32,000 units:
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)
Budgeted
Quantity
Target cost
1,200
5,600
2,100
440
Budgeted Cost
$ 7,200,000
2,750,000
2,780,000
440,000
850,000
1,100,000
150,000
$ 15,270,000
Actual
Quantity
1,700
4,150
2,200
640
Actual Cost
$ 7,700,000
2,975,000
2,710,000
420,000
835,000
1,075,000
200,000
$ 15,915,000
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.)
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