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Calculate the target cost for maintaining current market share and profitability

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Problem 2;A company?s sales volume averages 4,000 units per year.;Recently, its main competitor reduced the price of its product to $48.;The company expects sales to drop dramatically unless it matches the competitor's price.;In addition, the current profit per unit must be maintained.;Information about the product (for production of 4,000) is as follows.;Standard Quantity Actual Quantity Actual Cost;Materials (pounds) 5,800 6,000 $60,000;Labor (hours) 1,800 2,000 $20,000;Setups (hours) 0 225 $8,000;Material handling (moves) 0 400 $5,000;Warranties (number repaired) 0 300 $15,000;Required;Calculate the target cost for maintaining current market share and profitability.;Calculate the non-value-added cost per unit.;If non-value-added costs can be reduced to zero, can the target cost be achieved?

 

Paper#20454 | Written in 18-Jul-2015

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