TwoShaft Inc. manufactures a wide variety of parts for recreational boating, including boat engines. The component is purchased by OEM (Original Equipment Manufacturers) such as Mercury and Honda, for use in the larger and more powerful outboards. The units sell for $960, and sales volume averages 33,500 units per year. Recently, TwoShaft's major competitor lowered the price of the equivalent part to $740. The market was very competitive, and TwoShaft realized it had to meet the new price or lose significant market share. The controller assembled the following data for the most recent year:
TwoShaft Inc. manufactures a wide variety of parts for recreational boating, including boat engines. The component is purchased by OEM (Original Equipment Manufacturers) such as Mercury and Honda, for use in the larger and more powerful outboards. The units sell for $960, and sales volume averages 33,500 units per year. Recently, TwoShaft's major competitor lowered the price of the equivalent part to $740. The market was very competitive, and TwoShaft realized it had to meet the new price or lose significant market share. The controller assembled the following data for the most recent year:
| Cost and Usage for Production of 33,500 Units | ||||||||||
| Actual Quantity | Actual Cost | |||||||||
| Materials | $ | 6,671,000 | $ | 7,151,000 | ||||||
| Direct labor | 2,287,000 | 2,191,000 | ||||||||
| Indirect labor | 3,279,000 | 3,087,000 | ||||||||
| Inspection (hours) | 4,100 | 553,500 | ||||||||
| Materials handling (number of purchases) | 73,750 | 402,250 | ||||||||
| Machine setups | 5,350 | 1,505,700 | ||||||||
| Returns and rework (number of times) | 1,000 | 97,400 | ||||||||
| Total | $ | 14,987,850 | ||||||||
The target cost for maintaining current market share and profitability is (round to nearest cent):
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$291.40.
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$247.91.
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$297.40.
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$227.40.
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$221.40.
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