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 part to $675. To maintain its very competitive win ratio and to reduce the chances of losing 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: Item Direct materials Budgeted Budgeted Actual Quantity Cost $7,500,000 Actual Quantity Cost $8,000,000 Direct labor 2,660,000 3,125,000 Indirect labor 2,900,000 2,620,000 Inspection (hours and cost) 1,320 500,000 2,000 450,000 Materials handling (number of 6,500 1,000,000 4,450 985,000 purchases and cost) Machine setups (number and 2,400 1,250,000 2,500 1,225,000 cost) Returns and repair (number of 500 180,000 700 230,000 times and cost) Total $15,990,000 $16,635,000 Required: Calculate the target cost for maintaining current market share and profitability. (Do not round intermediate calculations. Round your answer to 2 decimal places.)
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 part to $675. To maintain its very competitive win ratio and to reduce the chances of losing 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: Item Direct materials Budgeted Budgeted Actual Quantity Cost $7,500,000 Actual Quantity Cost $8,000,000 Direct labor 2,660,000 3,125,000 Indirect labor 2,900,000 2,620,000 Inspection (hours and cost) 1,320 500,000 2,000 450,000 Materials handling (number of 6,500 1,000,000 4,450 985,000 purchases and cost) Machine setups (number and 2,400 1,250,000 2,500 1,225,000 cost) Returns and repair (number of 500 180,000 700 230,000 times and cost) Total $15,990,000 $16,635,000 Required: Calculate the target cost for maintaining current market share and profitability. (Do not round intermediate calculations. Round your answer to 2 decimal places.)
Cornerstones of Cost Management (Cornerstones Series)
4th Edition
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Don R. Hansen, Maryanne M. Mowen
Chapter12: Activity-based Management
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Financial accounting 5.3
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 part to $675. To maintain its very competitive win ratio and to
reduce the chances of losing 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:
Item
Direct materials
Budgeted Budgeted Actual
Quantity
Cost
$7,500,000
Actual
Quantity
Cost
$8,000,000
Direct labor
2,660,000
3,125,000
Indirect labor
2,900,000
2,620,000
Inspection (hours and cost)
1,320
500,000
2,000
450,000
Materials handling (number of
6,500
1,000,000
4,450
985,000
purchases and cost)
Machine setups (number and
2,400
1,250,000
2,500
1,225,000
cost)
Returns and repair (number of
500
180,000
700
230,000
times and cost)
Total
$15,990,000
$16,635,000
Required:
Calculate the target cost for maintaining current market share and
profitability. (Do not round intermediate calculations. Round your
answer to 2 decimal places.)
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