Reference no: EM132510124

MaxiDrive manufactures a wide variety of parts for recreational boating, including a gear and driveshaft part for high-powered outboard boat engines. Original equipment manufacturers such as Mercury and Honda purchase the components for use in large, powerful outboards. The part sells for $615, and sales volume averages 25,500 units per year. Recently, MaxiDrive's major competitor reduced the price of its equivalent unit to $552. The market is very competitive, and MaxiDrive realizes it must meet the new price or lose significant market share. Management has begun paying closer attention to costs and has reconfirmed the current existing standard costs. The controller then assembled the following cost and usage data for the most recent year for MaxiDrive's production of 25,500 units:

                               Budgeted Quantity Actual       Budgeted Cost Actual  Quantity

CostDirect materials        $6,550,000               $7,050,000

Direct labor                  2,515,000               2,650,000

Indirect labor                 2,520,000                  2,425,000

Inspection (hours and cost) 940                      310,000      

                                               1,050           355,000

Materials handling (number of purchases and cost) 3,650    525,000

                                                             3,500             510,000

 Machine setups (number and cost)            1,450              775,000    

                                                          1,550                750,000

Returns and rework (number of times and cost)  310           85,000

                                                             510                  135,000

                                                             $13,280,000        $13,875,000

Required:

Question 1. Calculate the target cost for maintaining current market share and profitability. (Do not round intermediate calculations. Round your answer to 2 decimal places.)