Timberland Targent Cost to Achieve 15% return
Not what you're looking for?
Timberland is considering manufacturing special crates to be used for shipping new mainframe computers. The company is working with a computer manufacturer who is thinking of using the new crates as a standard component for shipping their computers. Timberland's marketing manager has determined that mainframe computer buyers would be willing to pay $110 for a crate. Timberland's packaging and assembly cost for each new crates is $25.
Research conducted jointly by the computer maker and Timberland's marketing personnel shows that customers want six features. These are: (1) durability, (2) ease of packing, (3) protection from damage (4) ease of use (5) compatibility with most brands of mainframes, and (6) ability to reuse the crates.
Based on this research, Timberland's engineers have come up with a design that uses four main production modules or processes. Each process has several major sub-processes. A list of the major processes, together with preliminary cost estimates (includes all labor, material and overhead) for manufacturing or buying each process, appears in Table 1 below.
In addition to the above, the marketing department estimates that order filling (primarily order processing and delivery) costs would run $4.00 per unit. General and administrative costs are expected to be $14.00 a unit. Timberland expects to earn a 15 percent return on the selling price.
Assume that each process would absorb any necessary cost reductions proportionately to the total costs of all the processes (exclude packaging and assembly, order filling costs and general and administrative costs since it has been determined that these costs can not be reduced.)
Table One
Process Estimated Current Costs
A $9.50
B $8.50
C $8.00
D $46.00
Total Costs $72.00
Requirement:
Prepare a schedule showing the target cost that must be achieved to earn the required 15% return. Please show all computations.
Purchase this Solution
Solution Summary
The tutorial is in Excel, and the strategy for Timberland to use to identify the target cost required for a 15% return is provided.
Education
- BSc, University of Virginia
- MSc, University of Virginia
- PhD, Georgia State University
Recent Feedback
- "hey just wanted to know if you used 0% for the risk free rate and if you didn't if you could adjust it please and thank you "
- "Thank, this is more clear to me now."
- "Awesome job! "
- "ty"
- "Great Analysis, thank you so much"
Purchase this Solution
Free BrainMass Quizzes
Six Sigma for Process Improvement
A high level understanding of Six Sigma and what it is all about. This just gives you a glimpse of Six Sigma which entails more in-depth knowledge of processes and techniques.
Basic Social Media Concepts
The quiz will test your knowledge on basic social media concepts.
Social Media: Pinterest
This quiz introduces basic concepts of Pinterest social media
Balance Sheet
The Fundamental Classified Balance Sheet. What to know to make it easy.
Organizational Behavior (OB)
The organizational behavior (OB) quiz will help you better understand organizational behavior through the lens of managers including workforce diversity.