Reference no: EM132514227
Point 1: 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 $690, and sales volume averages 30,500 units per year. Recently, MaxiDrive's major competitor reduced the price of its equivalent unit to $616. 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 30,500 units:
Budgeted Actual Quantity Budgeted Cost QuantityActual
CostDirect materials $7,050,000 $7,550,000
Direct labor 2,725,000 2,900,000
Indirect labor 2,720,000 2,675,000
Inspection (hours and cost) 1,140 410,000 1,550 405,000
Materials handling (number of purchases and cost) 5,150 775,000
4,000 760,000
Machine setups (number and cost) 1,950 1,025,000
2,050 1,000,000
Returns and rework (number of times and cost) 410 135,000
610 185,000
$14,840,000 $15,475,000
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.)