Assume all the information in Exercise 12.15. Marcel has just received some bad news. A foreign competitor has introduced products very similar to P-41 and P-63. Given their announced selling prices, he estimates the P-41 clone to have a manufacturing cost of approximately ‚¬680 and the P-63 clone to have a manufacturing cost of approximately ‚¬390. He calls a meeting of product designers and manufacturing personnel at the printer division. They all agree to have the ‚¬680 and ‚¬390 figures become target costs for redesigned versions of CI's P-41 and P-63, respectively. Product designers examine alternative ways of designing printers with comparable performance but lower cost. They come up with the following revised designs for P-41 and P-63 (termed P-41 REV and P-63 REV, respectively):

Required
1. What is a target cost per unit?
2. Using the activity-based costing system outlined in Problem 12.15, calculate the manufacturing costs of P-41 REV and P-63 REV. How do they compare with the ‚¬680 and ‚¬390 target costs per unit?
3. Explain the differences between P-41 and P-41 REV and between P-63 and P-63 REV.
4. Assume now that Marcel has achieved major cost reductions in one of the activity areas. As a consequence, the allocation rate in the assembly-management activity area will be reduced from ‚¬40 to ‚¬28 per assembly-hour. How will this activity-area cost reduction affect the manufacturing costs of P-41 REV and P-63 REV? Comment on the results.

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P-41 REV P-63 REV Direct material costs Number of parts Hours of assembly time Number of machine-inserted parts Number of manually inserted parts Hours of quality testing 381.20 71 parts 2.1 hours 59 parts 12 parts 1.2 hours 263.10 39 parts 1.6 hours 29 parts 10 parts 0.9 hours