Ascertain the target cost for Model J20, based on historical markup on the product cost and the selling price which is maintained.

Question

Millennium Printers Inc. manufactures color laser printers. Model L-1819 presently sells for $150 and has a total product cost of $120, as follows: Direct materials $90 Direct labor 20 Factory overhead 10 Total $120 It is estimated that the competitive selling price for color laser printers of this type will drop to $140 next year. Millennium Printers wants to establish a target cost to maintain its historical markup percentage on product cost. Engineers have provided the following cost reduction ideas: Purchase a plastic printer cover with snap-on assembly. This will reduce the amount of direct labor by nine minutes per unit. Add an inspection step that will add six minutes per unit of direct labor but reduce the materials cost by $3 per unit. Decrease the cycle time of the injection molding machine from four minutes to three minutes per part. Thirty percent of the direct labor and 45% of the factory overhead is related to running injection molding machines. The direct…

Answer 1

Question

Chapter 11, Problem 19E

a)

To determine

Ascertain the target cost for Model J20, based on historical markup on the product cost and the selling price which is maintained.

b)

To determine

Ascertain the required cost reduction.

c)

To determine

Evaluate the three engineering improvements to achieve the required cost reduction.

Expert Solution & Answer

Trending nowThis is a popular solution!

See solution

Check out sample textbook solution

Students have asked these similar questions

Millennium Printers Inc. manufactures color laser printers. Model L-1819 presently sells for $150 and has a total product cost of $120, as follows: Direct materials $90 Direct labor 20 Factory overhead 10 Total $120 It is estimated that the competitive selling price for color laser printers of this type will drop to $140 next year. Millennium Printers wants to establish a target cost to maintain its historical markup percentage on product cost. Engineers have provided the following cost reduction ideas: Purchase a plastic printer cover with snap-on assembly. This will reduce the amount of direct labor by nine minutes per unit. Add an inspection step that will add six minutes per unit of direct labor but reduce the materials cost by $3 per unit. Decrease the cycle time of the injection molding machine from four minutes to three minutes per part. Thirty percent of the direct labor and 45% of the factory overhead is related to running injection molding machines. The direct…

Instant Image Inc. manufactures color laser printers. Model J20 presently sells for $455 and has a product cost of $218, as follows: Cost Driver Dollar Amount Direct materials $165 Direct labor 35 Factory overhead 18 Total 218 It is estimated that the competitive selling price for color laser printers of this type will drop to $400 next year. Instant Image has established a target cost to maintain its historical markup percentage on product cost. Engineers have provided the following cost-reduction ideas: Purchase a plastic printer cover with snap-on assembly, rather than with screws. This will reduce the amount of direct labor by 15 minutes per unit. Add an inspection step that will add six minutes per unit of direct labor but reduce the materials cost by $20 per unit. Decrease the cycle time of the injection molding machine from four minutes to three minutes per part. Forty percent of the direct labor and 48% of the factory overhead are related…