This preview shows pages 1–3. Sign up to view the full content.
This preview has intentionally blurred sections. Sign up to view the full version.View Full Document
Unformatted text preview: Disadvantages include: the long-term contract, which can prevent Sayre from using multiple, competing suppliers. Risks involve the reliability of the supplier; the quality of the cheaper chips; perceived or actual reductions in quality of cheaper components. b. The analysis shows that Sayre cannot meet its target return on sales with the planned changes. c. A further price reduction will require significant cost reductions to meet the target return on sales, as follows. Sales, Units 200,000 Sales price per unit $ 540.00 Return on sales 15% Profit per unit $ 81.00 Target cost per unit $ 459.00 Total target cost $91,800,000 Currently feasible costs Product costs per unit $ 509.04 Currently feasible costs $101,808,000 Cost reduction target $10,008,000...
View Full Document
- Spring '08
- Cost Accounting