Sunshine Products makes lawn furniture in various styles. Recently, it decided to launch a new line of reclining lawn chairs for poolside use. The design team put together the following information.

The company wants to sell the units at $65 and wants a 40% margin to cover overhead and other company costs.

The design could be altered by using cheaper decking material ($6 per yard instead of $10) and cheaper steel tubing ($0.15 per foot), and redesigning the chair to eliminate half of the screws and grommets. This would reduce assembly time by half. It would also make the chair lighter to carry but would reduce its overall durability from the industry standard of five years to three years of reliable service.

REQUIRED:

a. What is the company’s target cost?

b. What is the current estimated cost to make the recliner?

c. What is the cost gap?

d. Using the design team’s suggestions for bringing down the cost, can the chair now meet its target cost?

e. How do you feel about the changes being made to the design? Think about them from the customer’s perspective; that is, the attributes they care most about.

Transcribed Image Text:

Cost per Unit Used Sp.00 per yard Component Units Needed Decking material Steel tubing 4 yards $0.25 per foot S0.75 each 20 feet Armrests 2 Reclining ratchet mechanism 2 $150 each Screws 20 $0.05 each Grommets 20 $0.03 each Labor Bminutes SK00 per hour