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EXERCISE 21 LO.4 (Target costing) Taurus Tools has developed a new kitchen utensil.
The firm has conducted significant market research and estimated the following pattern
for sales of the new product: Expected Price Year Expected Volume per Unit 1 38,000
units $19 2 48,000 units 18 3 90,000 units 16 4 40, 000 units 12 If the firm desires to net
$4.50 per unit in profit over the life of the product, what is the target cost to produce the
38,000 x $19
Required profit 216,000 × $4.50
Total target cost
Target cost per unit:
$2,534,000 ÷ 216,000 = $11.73
Exercise 29 LO.5 (JIT implementation) William Manufacturing Company began
implementing a just-in-time inventory system several months ago. The production and
purchasing managers, however, have not seen any dramatic improvements in throughput.
They have decided that the problems are related to their suppliers. The company’s three
suppliers seem to send the wrong materials at the wrong times. Prepare a discussion of
the problems that might exist in this situation. Be certain to address the following items:
internal and external communication; possible engineering changes and their impacts;
number, quality, and location of suppliers; and length of system implementation.
JIT requires close relations and communications with suppliers. Preferably, there
should be a few, well-cultivated suppliers who are "trained" to know
precisely your inventory needs and who understand the critical requirement
of meeting your just-in-time operation schedule. Further, they should be
made aware that they will be dismissed for defective or inappropriate
products or service or for failure to meet delivery schedules. All of the above
requires continual close communications between the vendor and the JIT
In this case, William Manufacturing needs to consider whether some or all of
the responsibility rests with the company itself. Have the vendors been
properly "trained" and made precisely aware of product and timing needs?
Have the vendors been chosen with the expertise, facilities and delivery
capability to service William's requirements? Do William's personnel know