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 $660, and sales volume averages 28,500 units per year. Recently, MaxiDrive's major competitor reduced the price of its equivalent unit to $585. 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 28,500 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) Budgeted Quantity Target cost 1,060 4,550 1,750 370 Budgeted Cost $6.850.000 2,645,000 2,640,000 Actual Quantity 370,000 1,350 675,000 3,000 925,000 1,850 115,000 570 $14,220,000 Actual Cost $7,350,000 2,000,000 2,575,000 385,000 660,000 900,000 165,000 $14,835,000 Required: 1. 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 $660, and sales volume averages 28,500 units per year. Recently, MaxiDrive's major competitor reduced the price of its equivalent unit to $585. 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 28,500 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) Budgeted Quantity Target cost 1,060 4,550 1,750 370 Budgeted Cost $6.850.000 2,645,000 2,640,000 Actual Quantity 370,000 1,350 675,000 3,000 925,000 1,850 115,000 570 $14,220,000 Actual Cost $7,350,000 2,000,000 2,575,000 385,000 660,000 900,000 165,000 $14,835,000 Required: 1. Calculate the target cost for maintaining current market share and profitability. (Do not round intermediate calculations. Round your answer to 2 decimal places.)
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text: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 $660, and sales volume averages 28,500 units per year. Recently, MaxiDrive's major competitor
reduced the price of its equivalent unit to $585. 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
28,500 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)
Budgeted
Actual
Quantity Budgeted Cost Quantity
Target coat
1,060
4,550
1,750
370
$6.850.000
2,645,000
2,640,000
370,000 1,350
675,000
3,800
1,850
570
925,000
115,000
$14,220,000
Actual Cost
$7,350,000
2,000,000
2,575,000
385,000
660,000
900,000
165,000
$14,835,000
Required:
1. 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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