Chapter 19, Problem 2DC

Harris Systems has decided to adopt ABC. To remain competitive, Harris Systems’s management believes the company must produce the type of servers produced in Job B (from Decision Case 19-1) at a target cost of $5,400. Harris Systems has just joined a B2B e-market site that management believes will enable the firm to cut direct materials costs by 10%. Harris’s management also believes that a value engineering team can reduce assembly time.

  Compute the assembling cost savings required per Job B-type server to meet the $5,400 target cost. (Hint: Begin by calculating the direct materials, direct labor, and allocated overhead costs per server.)