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is CengageNOWv2lOnline ×Ye chegg study | Guided S/X -> d v2.cengagenow.com/ilrn/ta takeAssignmentMain.do?invoker= assignments&t; n Locator= assignment-take&inprogress-false; Chapter 10 Assignment Print Item Target Costing Laser Impressions, Incr manufectures color leser printers. Model 320 presently sells for $325 and has a total product cost of $260, as follows Direct materials Direct labor Factory overhead Total $190 $260 It is estimated that the competitive selling price for color laser printers of this type will drop to $310 next year. Laser Impressions has established a target cost to maintain its historical markup percentage on product cost. Engineers have provided the following cost reduction idess: 1. Purchase a plastic printer cover with snsp-on assembly, rather than with screws. This will reduce the amount of direct labor by 9 minutes per unit. 2. Add an inspection stap that will add sx minutes par unit of direct labor but raduce the matorials cost by $7 per unit. 3 ecrease the cycle t me of he njection molding machine from our minutes to three minutes per pert. Thirty percent o the direct labor end 45% of the factory over eed . e eeted to running njection molding machines. The direct labor rate is $21 per hour a. Determine the target cost for Model 120 assuming that the historical markup on product cost and selling price are maintained. Round your final answer to two decimal places b. Determine the required cost reduction, Enter as a positive number. Round your final answer to two decimel places. c. Evaluste the three engineering improvements together to determine if the required cost reduction (drift) can be echieved. Enter all amounts as positive numbers. Do not round interim celculations but round your final answers to two decimal places 1. Direct labor reduction 2. Additional inapection Totel savings Check My Work 2 more Cheok My Work uses remaining. Previous Next ssignment Score: 17.90% All work saved. save and Exit Submit Assignment for Grading 3-23 PM O Type here to search 12/12/2017Explanation / Answer
Solution:
Existing selling price of printer = $325 per unit
Existing cost per unit = $260
Existing margin per unit = $325 - $260 = $65 per unit
Mark up on cost = 65/260*100 = 25%
Mark up on Sale = 65/325*100 = 20%
Revised selling price next year = $310 per unit
Target margin per unit if historical markup to be maintained = 310*20% = $62
Target cost to maintain historic mark-up = $310 - $62 = $ 248 per unit
Required cost reduction = 260 – 248 = $12 per unit
Cost saving with improvements:
Direct labor rate = $21/Hour
Saving per unit due to this improvement = $21/60*9 = $3.15 per unit
Saving per unit due to this improvement = $7 – 21/60*6 = $4.90 per unit
30% direct labor and 45% of factory overhead are related to this activity, it means
Direct labor = 50*30% = $15 per unit is cost of this activity
Factory overhead = 20*45% = $9 per unit is cost of this activity
Saving per unit due to injection molding productivity improvement = ($15 + $9) * 25% = $6 per unit
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