Min target prices target costs activity based costing

This preview shows page 9 - 11 out of 25 pages.

We have textbook solutions for you!
The document you are viewing contains questions related to this textbook.
An Introduction to Management Science: Quantitative Approach
The document you are viewing contains questions related to this textbook.
Chapter 10 / Exercise 17
An Introduction to Management Science: Quantitative Approach
Anderson/Sweeney
Expert Verified
12-21(25–30 min.) Target prices, target costs, activity-based costing.
12-9
We have textbook solutions for you!
The document you are viewing contains questions related to this textbook.
An Introduction to Management Science: Quantitative Approach
The document you are viewing contains questions related to this textbook.
Chapter 10 / Exercise 17
An Introduction to Management Science: Quantitative Approach
Anderson/Sweeney
Expert Verified
12-22 (20 min.)Target costs, effect of product-design changes on product costs. 1. and 2.Manufacturing costs of HJ6 in 2008 and 2009 are as follows:20082009Per UnitPer UnitTotal(2) =Total(4) =(1)(1) ÷ 3,500(3)(3) ÷ 4,000Direct materials, $1,200 × 3,500; $1,100 × 4,000$4,200,000$1,200$4,400,000$1,100Batch-level costs, $8,000 × 70; $7,500 × 80560,000160600,000150Manuf. operations costs, $55 × 21,000; $50 × 22,0001,155,0003301,100,000275Engineering change costs, $12,000 × 14; $10,000 × 10168,00048100,00025Total$6,083,000$1,738$6,200,000$1,5503.Target manufacturing costper unit of HJ6 in 2009= Manufacturing costper unit in 2008× 90%= $1,738 × 0.90 = $1,564.20Actual manufacturing cost per unit of HJ6 in 2009 was $1,550. Hence, Medical Instruments did achieve its target manufacturing cost per unit of $1,564.204.To reduce the manufacturing cost per unit in 2009, Medical Instruments reduced the cost per unit in each of the four cost categories—direct materials costs, batch-level costs, manufacturing operations costs, and engineering change costs. It also reduced machine-hours and number of engineering changes made—the quantities of the cost drivers. In 2008, Medical Instruments used 6 machine-hours per unit of HJ6 (21,000 machine-hours ÷3,500 units). In 2009, Medical Instruments used 5.5 machine-hours per unit of HJ6 (22,000 machine-hours ÷4,000 units). Medical Instruments reduced engineering changes from 14 in 2008 to 10 in 2009. Medical Instruments achieved these gains through value engineering activities that retained only those product features that customers wanted while eliminating nonvalue-added activities and costs.12-10

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture