Question

Quality Industries manufactures large workbenches for industrial use. Yewell Hartnet, the Vice President for marketing at Quality Industries, concluded from market analysis that sales were dwindling for Quality's workbenches due to aggressive pricing by competitors. Quality's workbench sells for $1,140 whereas the competition's comparable workbench sells for $1,060. Yewell determined that a price drop to $1,060 would be necessary to retain market share and annual sales of 13,000 tables. Cost data based on sales of 13,000 workbenches: Budgeted Quantity Actual Quantity Actual Cost Direct materials (pounds) 175,000 168,000 $3,450,000 Direct labor (hours) 72,800 71,500 825,000 Machine setups (no. of setups) 900 880 250,000 Mechanical assembly (machine hours) 273,000 281,250 3,750,000 If the profit per unit is maintained, the target cost per unit is (rounded to the nearest whole dollar): $489. $557. $516. $424. $345.

Answer 1

Answer:

Target cost per unit is =$557

Working notes for the above answer is as under

	Budgeted quantiry	Actual quantiry	Actual Cost
Direct material (pound)	175000	168000	3450000
Direct Labor (Hour)	72800	71500	825000
Machine set-up (No of set-up)	900	880	250000
Mechanical assembly (Machine-Hour)	273000	281250	3,750,000
			8275000
Unit cost for 13000 tablets =8275000/13000=636.54			637
Sales Price			1140
Current profit per unit			503
New sale price			1060
target cost per unit to maintain current profit =1060-503			557