Calculate the nonvalue-added cost per unit, Cost Accounting

Question

Roseville, Ltd., sells one of its products for $500 each. Sales volume averages 1,000 units per year. Recently, its main competitor priced their competing product at 10 percent below Roseville's price. Roseville expects its sales to drop dramatically unless it matches the competitor's price. Despite the anticipated price reduction, Roseville would like to maintain its current profit per unit.

Information regarding the inputs required to produce 1,000 units of product is as follows:

                                    SQ

                        AQ

          Actual Cost

Materials (kilograms)

7,800

8,000

$160,000

Labour (hours)

600

720

108,000

Setups (hours)

-0-

600

34,000

Material handling (moves)

-0-

300

58,000

Warranties (number repaired)

-0-

200

60,000







(A) Calculate the target cost for maintaining current market share and profitability.

(B) Calculate the nonvalue-added cost per unit.

(C) If nonvalue-added costs can be reduced to zero, can the target cost be achieved? Explain your answer.

Posted Date: 2/18/2013 4:58:17 AM | Location : United States







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