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# New target cost per unit

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Budgeted Amount Actual Amount Actual Cost
Direct materials \$4,200,000 \$4,500,000
Direct labor hrs 100,000 125,000 \$1,750,000
Machine setups 75,000 75,000 \$750,000
Mechanical assembly 375,000 400,000 \$5,000,000

Input data (from above):
On-line selling price per unit = \$3,000
Competitor's on-line selling price per unit = \$2,900
Recommeded selling price by Weekend Golfer = \$2,850
Normal sales volume per year by Weekend Golfer = 8,000

10-33 Requirements

1. Calculate the current cost and profit per unit.
2. How much of the current cost per unit is attributable to non-value-added activities?
3. Calculate the new target cost per unit for a sales price of \$2,850 if the profit per unit is maintained.
4. What strategy do you suggest for Weekend Golfer to attain the target cost calculated in requirement 3?

Solution

#### Solution Preview

Input data (from above):
On-line selling price per unit = \$3,000
Competitor's on-line selling ...

#### Solution Summary

Response provides the steps to compute the new target cost per unit

\$2.49