Solution-Determine the current cost per unit based on

Determine the current cost per unit based on actual data

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Reference no: EM133087486

Question - California Co. manufactures large valves for industrial use. The VP for marketing concluded from market analysis that sales were dwindling due to aggressive pricing by competitors. Sugarland's valve sells for $900 whereas the competition's comparable valve sells for $700. Jane determined that a price drop to $700 would be necessary to retain market share and annual sales of 5,000 valves.

Cost data based on sales of 5,000 valves:

	Budgeted Quantity	Actual Quantity	Actual Costs
Direct Materials (pound)	90,000	72,000	$900,000
Direct Labor (hours)	90,000	80,000	$720,000
Machine Setup (# of setups)	30,000	28,000	$840,000
Assembly (machine hours)	50,000	44,000	$440,000

Required -

a) Determine the current cost per unit based on actual data?

b) Determine the current profit per unit based on actual data?

c) If the current level of profit dollar per unit is maintained, determine the target cost per unit?

d) In order to reduce costs so as to reach the desired target cost, the company should also focus on reducing the cost of what manufacturing costs?

Reference no: EM133087486

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Determine the current cost per unit based on actual data

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