MaxiDrive manufactures a wide variety of parts for recreational boating, including a gear and driveshaft part for high-powered outboard boat engines. Original equipment manufacturers such as Mercury and Honda purchase the components for use in large, powerful outboards. The part sells for $630, and sales volume averages 26,500 units per year. Recently, MaxiDrive's major competitor reduced the price of its equivalent unit to $559. The market is very competitive, and MaxiDrive realizes it must meet the new price or lose significant market share. Management has begun paying closer attention to costs and has reconfirmed the current existing standard costs. The controller then assembled the following cost and usage data for the most recent year for MaxiDrive's production of 26,500 units: Direct materials Direct labor Indirect labor Inspection (hours and cost) Materials handling (number of purchases and cost) Machine setups (number and cost) Returns and rework (number of times and cost) Budgeted Quantity Budgeted Cost $ 6,650,000 Actual Quantity Actual Cost $ 7,150,000 2,565,000 2,700,000 2,560,000 2,475,000 980 3,950 330,000 1,150 365,000 575,000 3,600 560,000 1,550 825,000 1,650 800,000 330 95,000 530 145,000 $ 13,600,000 $ 14,195,000 Required: 1. Calculate the target cost for maintaining current market share and profitability. (Do not round intermediate calculations. Round your answer to 2 decimal places.) Target cost
MaxiDrive manufactures a wide variety of parts for recreational boating, including a gear and driveshaft part for high-powered outboard boat engines. Original equipment manufacturers such as Mercury and Honda purchase the components for use in large, powerful outboards. The part sells for $630, and sales volume averages 26,500 units per year. Recently, MaxiDrive's major competitor reduced the price of its equivalent unit to $559. The market is very competitive, and MaxiDrive realizes it must meet the new price or lose significant market share. Management has begun paying closer attention to costs and has reconfirmed the current existing standard costs. The controller then assembled the following cost and usage data for the most recent year for MaxiDrive's production of 26,500 units: Direct materials Direct labor Indirect labor Inspection (hours and cost) Materials handling (number of purchases and cost) Machine setups (number and cost) Returns and rework (number of times and cost) Budgeted Quantity Budgeted Cost $ 6,650,000 Actual Quantity Actual Cost $ 7,150,000 2,565,000 2,700,000 2,560,000 2,475,000 980 3,950 330,000 1,150 365,000 575,000 3,600 560,000 1,550 825,000 1,650 800,000 330 95,000 530 145,000 $ 13,600,000 $ 14,195,000 Required: 1. Calculate the target cost for maintaining current market share and profitability. (Do not round intermediate calculations. Round your answer to 2 decimal places.) Target cost
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:MaxiDrive manufactures a wide variety of parts for recreational boating, including a gear and driveshaft part for high-powered
outboard boat engines. Original equipment manufacturers such as Mercury and Honda purchase the components for use in
large, powerful outboards. The part sells for $630, and sales volume averages 26,500 units per year. Recently, MaxiDrive's
major competitor reduced the price of its equivalent unit to $559. The market is very competitive, and MaxiDrive realizes it
must meet the new price or lose significant market share. Management has begun paying closer attention to costs and has
reconfirmed the current existing standard costs. The controller then assembled the following cost and usage data for the most
recent year for MaxiDrive's production of 26,500 units:
Direct materials
Direct labor
Indirect labor
Inspection (hours and cost)
Materials handling (number of purchases and cost)
Machine setups (number and cost)
Returns and rework (number of times and cost)
Required:
Budgeted
Quantity
Actual
Budgeted Cost Quantity
Actual Cost
$ 6,650,000
$ 7,150,000
2,565,000
2,700,000
2,560,000
330,000
1,150
575,000 3,600
2,475,000
980
365,000
3,950
1,550
560,000
330
825,000
95,000
1,650
800,000
530
145,000
$ 13,600,000
$ 14,195,000
1. Calculate the target cost for maintaining current market share and profitability. (Do not round intermediate calculations.
Round your answer to 2 decimal places.)
Target cost
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