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 $700, and sales volume averages 35,000 units per year. Recently, MaxiDrive's major competitor reduced the price of its equivalent unit to $678. 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 35,000 units: Direct materials Direct labor Indirect labor Inspection (hours and cost) Materials handling (number of purchases and cost) Machine setups (number and cost) Returns and rework (number of times and cost) Required: Budgeted Quantity Budgeted Cost $ 7,500,000 Actual Quantity Actual Cost $8,000,000 2,660,000 2,900,000 1,320 500,000 2,000 6,500 2,400 500 1,000,000 4,450 1,250,000 2,500 180,000 700 $ 15,990,000 3,125,000 2,620,000 450,000 985,000 1,225,000 230,000 $ 16,635,000 1. Calculate the target cost for maintaining current market share and profitability. (Do not round intermediate calculations. Round your answer to 2 decimal places.) Target cost
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 $700, and sales volume averages 35,000 units per year. Recently, MaxiDrive's major competitor reduced the price of its equivalent unit to $678. 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 35,000 units: Direct materials Direct labor Indirect labor Inspection (hours and cost) Materials handling (number of purchases and cost) Machine setups (number and cost) Returns and rework (number of times and cost) Required: Budgeted Quantity Budgeted Cost $ 7,500,000 Actual Quantity Actual Cost $8,000,000 2,660,000 2,900,000 1,320 500,000 2,000 6,500 2,400 500 1,000,000 4,450 1,250,000 2,500 180,000 700 $ 15,990,000 3,125,000 2,620,000 450,000 985,000 1,225,000 230,000 $ 16,635,000 1. Calculate the target cost for maintaining current market share and profitability. (Do not round intermediate calculations. Round your answer to 2 decimal places.) Target cost
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text: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 $700, and sales volume averages 35,000 units per year. Recently, MaxiDrive's major competitor
reduced the price of its equivalent unit to $678. 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
35,000 units:
Direct materials
Direct labor
Indirect labor
Inspection (hours and cost)
Materials handling (number of purchases and cost)
Machine setups (number and cost)
Returns and rework (number of times and cost)
Required:
Budgeted
Quantity
Budgeted Cost
$ 7,500,000
Actual
Quantity
Actual Cost
$8,000,000
2,660,000
2,900,000
1,320
500,000
2,000
6,500
2,400
500
1,000,000 4,450
1,250,000
2,500
180,000
700
$ 15,990,000
3,125,000
2,620,000
450,000
985,000
1,225,000
230,000
$ 16,635,000
1. Calculate the target cost for maintaining current market share and profitability. (Do not round intermediate calculations. Round your
answer to 2 decimal places.)
Target cost
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