Acct344 Cost Accounting Week 3 Problem 2 - A company's sales volume averages

Acct344 Cost Accounting
Week 3 Homework

Problem 2:
A company's sales volume averages 4,000 units per year. The current selling price is $60.
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) - 225 8,000
Material handling (moves) - 400 5,000
Warranties (number repaired) - 300 15,000

a. Calculate the target cost for maintaining current market share and profitability.
b. Calculate the non-value-added cost per unit.
c. If non-value-added costs can be reduced to zero, can the target cost be achieved?
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