Calculate the nonvalue-added cost per unit, Cost Accounting

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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.

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