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Krupetskiy_Chapter5 - 5.41 Activities(modified from Exhibit...

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5.41 Activities (modified from Exhibit 5-1) Unit-level Acquire and use materials Batch-level Product-level Design and manufacture of molds Use equipment in production Customer-level Consult customers Provide additional warehousing Facility-level Manage workers Use main building Total monthly costs Monthly revenue per contract Monthly excess of revenue over ABC costs Target Cost Reduction Analysis Target Cost Calculation Expected monthly revenue Required rate of return on sales Less required return per month Target cost per month Contract duration Total target cost for the contract Setup and quality control for computer-controlled injection molding machines
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Currently feasible costs per month Unit-level resources and activities Acquire and use materials Batch-level resources and activities Set up and quality control - computer-controlled equipme Product-level resources and activities Design and manufacture molds Use computer-controlled equipment Customer-level resources and activities Consult customers Provide warehousing Facility-level resources and activities Manager workers Use building space Total currently feasible costs per month Total currently feasible costs for the contract duration Total cost reduction for the contract Percent cost reduction target
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(use 5.42 for practice) $12.00 18,000 $216,000 600.00 12 7,200 4,000.00 2 8,000 40,000.00 1 40,000 200.00 20 4,000 0.30 - - 4,000.00 1 4,000 12,000.00 1 12,000 291,200 $18.00 18,000 $324,000 $32,800 $324,000 20% $64,800 $259,200 36 months $9,331,200 Adjusted Cost-Driver Rates Monthly Level of Activity Estimated Monthly Costs and Revenues B X C Fredrick Hampel: Type your answer to part b here: The manager responsible for making this d to produce the product only if the company its costs by at least 11.0 percent, or $1,152,0 Perhaps through the use of ABC and ABM, the company performing non-value-added a or eliminated. In addition, PMI may be will sales target of 20%. Another alternative, in activities within the company, might be to h with the customer to discuss an increase in unit. It is also important to point out that thi analysis above does not consider the time v the manager making the decision will likely value of all future cash flows in assessing th
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$216,000 7,200 8,000 40,000 4,000 - 4,000 12,000 $291,200 $10,483,200 $1,152,000 11.0% Total Estimated Cost
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decision would recommend y could find ways to reduce 000 over three years. , PMI can find areas within activities that can be reduced ling to reduce its return on addition to addressing have further negotiations sales price from $18 per is is a 3-year project. The value of money. As a result, y want to look at the present his product.
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5.47(use 5.34-36 for Input data Net customer turnover 10% Target cost = market price less return on sales Expected service price $40 Less required return on sales 20% Target cost per unit of service Multiplied by number of customers 1,000 Total target cost for time period 1 Currently feasible costs: Activities Unit-level activities Purchase of phone service, per custome $20.00 Invoicing and billing, per customer 3.00 Customer-level activities Credit analysis, per new customers 25.00 Service installation, per new customers 45.00 Facility-level activities Bill collecting 960.00 Advertising and promotion 400.00
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