MaxiDrive manufactures a wide variety of parts for recreational boating, including a gear and driveshaft part for high-powered outboard boat engines. Original equipment manufacturers such as Mercury and Honda purchase the components for use in large, powerful outboards. The part sells for $610, and sales volume averages 25,000 units per year. Recently, MaxiDrive€™s major competitor reduced the price of its equivalent unit to $550. The market is very competitive, and Maxi-Drive realizes it must meet the new price or lose significant market share. The controller has assembled these cost and usage data for the most recent year for MaxiDrive€™s production of 25,000 units:

Required
1. Calculate the target cost for maintaining current market share and profitability.
2. Can the target cost be achieved?How?

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Actual Cost $7,000,000 2,625,000 2400,000 Budgeted Quantity Budgeted Actual Quantity Cost Materials Direct labor Indirect labor Inspection (hours and cost) Materials handling (number of $6,500,000 2,500,000 2,500,000 300,000 920 1,000 350,000 purchases and cost Machine setups (number and cost) Returns and rework (number of 3,500 1,400 500,000 750,000 3,450 1,500 485,000 725,000 imes and cost) 300 80,000 500 130,000 $13,130,000 S13,715,000