Instruments uses a manufacturing costing system with one direct-cost category (direct materials) and three indirect-cost categories:

a.	Setup, production-order, and materials-handling costs that vary with the number of batches
b.	Manufacturing-operations costs that vary with machine-hours
c.	Costs of engineering changes that vary with the number of engineering changes made

In response to competitive pressures at the end of

2016,

Therapy

Instruments used value-engineering techniques to reduce manufacturing costs. Actual information for

2016

and

2017

is as follows:

	2016	2017
Setup, production-order, and materials-handling costs per batch	$8,800	$8,400
Total manufacturing-operations cost per machine-hour	$56	$46
Cost per engineering change	$11,000	$8,000

The management of Therapy Instruments wants to evaluate whether value engineering has succeeded in reducing the target manufacturing cost per unit of one of its products, HJ6, by 20%. Actual results for 2016 and 2017 for HJ6 are:

	Actual Results for 2016	Actual Results for 2017
Units of HJ6 produced	3,000	4,000
Direct material cost per unit of HJ6	$1,800	$1,000
Total number of batches required to produce HJ6	80	90
Total machine-hours required to produce HJ6	20,400	19,200
Number of engineering changes made	15	10

Calculate the manufacturing cost per unit of HJ6 in 2016, then in 2017. (Round your answers to the nearest whole dollar.)

	2016
	cost per unit
Direct materials
Batch-level costs
Mfg. operations costs
Engineering change costs
Total

Did Bio Instruments achieve the target manufacturing cost per unit for HJ6 in 2017? Explain.

Answer rating: 100% (QA)

Calculation of manufacturing cost per unit of HJ6 in 2016 and 2017 Step1 Calculate total manufacturi... View the full answer