Assume all the information in Exercise 12.15. Marcel has just received some bad news. A foreign competitor

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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):
Assume all the information in Exercise 12.15. Marcel has just

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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Related Book For  book-img-for-question

Management and Cost Accounting

ISBN: 978-1405888202

4th edition

Authors: Alnoor Bhimani, Charles T. Horngren, Srikant M. Datar, George Foster

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