uct Life Cycle...23Required:1 Calculate the current cost and profit per unit.2. How much of the current cost per unit is attributable to non-value-addedactivities?3. Calculate the new target cost per unit for a sales price of P800 if the profitper unit is maintained.4. What strategy do you suggest for Benchmark to attain the target costcalculated in requirement 3? Problem 4 (Target Costing, Strategy)Benchmark Industries manufactures large workbenches for industrial use.Wally Garcia, the vice president for marketing at Benchmark, has concludedfrom his market analysis that sales are dwindling for Benchmark's standardtable because of aggressive pricing by competitors. Benchmark's table sellsfor P875 whereas the competition's comparable table is selling in the P80Qrange. Garcia has determined that dropping price to P800 is necessary to regainthe firm's annual market share of 10,000 tables. Cost data based on sales of10,000 tables are:Budgeted Amount400,000 sq. ft.85,000 hrs.30,000 hrs320,000 hrs.Actual Amount Actual Cost425,000 sq. ft.100,000 hrs.30,000 hrs.320,000 hrs.Direct materialsP2,700,0001,000,000300,0004,000,000Direct laborMachine setupsMechanical assembly

Cost: In accounting, the cost is related to monetary value spend on raw material, services, and…

table because of aggressive pricing by competitors. Benchmark's table sells for P875 whereas the competition's comparable table is selling in the P800 range. Garcia has determined that dropping price to P800 is necessary to regain the firm's annual market share of 10,000 tables. Cost data based on sales of 10,000 tables are: Direct materials Direct labor Machine setups Mechanical assembly Budgeted Amount 400,000 sq. ft. 85,000 hrs. 30,000 hrs 320,000 hrs. Actual Amount Actual Cost 425,000 sq. ft. 100,000 hrs. 30,000 hrs. 320,000 hrs. P2,700,000 1,000,000 300,000 4,000,000

table because of aggressive pricing by competitors. Benchmark's table sells for P875 whereas the competition's comparable table is selling in the P800 range. Garcia has determined that dropping price to P800 is necessary to regain the firm's annual market share of 10,000 tables. Cost data based on sales of 10,000 tables are: Direct materials Direct labor Machine setups Mechanical assembly Budgeted Amount 400,000 sq. ft. 85,000 hrs. 30,000 hrs 320,000 hrs. Actual Amount Actual Cost 425,000 sq. ft. 100,000 hrs. 30,000 hrs. 320,000 hrs. P2,700,000 1,000,000 300,000 4,000,000

Managerial Accounting

15th Edition

ISBN:9781337912020

Author:Carl Warren, Ph.d. Cma William B. Tayler

Publisher:Carl Warren, Ph.d. Cma William B. Tayler

Chapter11: Differential Analysis And Product Pricing

Section: Chapter Questions

Problem 19E

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