. Q....The target cost for one of the new ergonomically designed computer mice has beencalculated to be £4.50, which is 10% less than the actual cost currently achievable.The Board of Directors is considering providing some internal training to improveefficiency of labour, and hence reduce the cost gap. The current material cost is£1.40 per unit and this will not change as efficiency changes. Labour rates are £12per hour.To the nearest whole %, how much of an efficiency improvement (measured by the% reduction in labour time per computer mouse) is required remove the cost gapcompletely? Show all workings. Mini-scenario 2MiceAreUs Limited manufactures two types of computer mouse; traditional wired (TW),traditional bluetooth (TB). These are in continuous production at the company's factory inDunbar, Scotland.Each mouse incorporates around 25 component parts that are bought from outsidesuppliers.Sales have recently been declining and the Board of Directors is considering a proposal todiscontinue TW and TB and replace them by a large range of ergonomically designedcomputer mice.These new mice would be highly customised for individual corporate customers and wouldbe frequently renewed to adopt the latest technologies and allow for market changes. Theywould be produced in short, discontinuous batches with production lines switching frequentlyfrom one product to another.The CEO claims that the adoption of activity-based costing will bring benefits to thebusiness, but the CFO is keener on a lifecycle costing approach.

1. Efficiency in labour time will reduce the labour hours per unit. Therefore to achieve the target…

Answered: The target cost for one of the new…

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter11: Strategic Cost Management

Section: Chapter Questions

Problem 6E: Keith Golding has decided to purchase a personal computer. He has narrowed his choices to two: Brand...

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. Q....The target cost for one of the new ergonomically designed computer mice has been
calculated to be £4.50, which is 10% less than the actual cost currently achievable.
The Board of Directors is considering providing some internal training to improve
efficiency of labour, and hence reduce the cost gap. The current material cost is
£1.40 per unit and this will not change as efficiency changes. Labour rates are £12
per hour.
To the nearest whole %, how much of an efficiency improvement (measured by the
% reduction in labour time per computer mouse) is required remove the cost gap
completely? Show all workings.

Mini-scenario 2
MiceAreUs Limited manufactures two types of computer mouse; traditional wired (TW),
traditional bluetooth (TB). These are in continuous production at the company's factory in
Dunbar, Scotland.
Each mouse incorporates around 25 component parts that are bought from outside
suppliers.
Sales have recently been declining and the Board of Directors is considering a proposal to
discontinue TW and TB and replace them by a large range of ergonomically designed
computer mice.
These new mice would be highly customised for individual corporate customers and would
be frequently renewed to adopt the latest technologies and allow for market changes. They
would be produced in short, discontinuous batches with production lines switching frequently
from one product to another.
The CEO claims that the adoption of activity-based costing will bring benefits to the
business, but the CFO is keener on a lifecycle costing approach.

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