DualShaft Inc. manufactures a wide variety of parts for recreational boating, including boat engines. The component is
Question:
DualShaft Inc. manufactures a wide variety of parts for recreational boating, including boat engines. The component is purchased by OEM (original equipment manufacturers) such as Mercury and Honda, for use in the larger and more powerful outboards. The units sell for $740 and sales volume averages 55,000 units per year. Recently, DualShaft's major competitor lowered the price of the equivalent part to $679. The market was very competitive, and DualShaft realized it had to meet the new price or lose significant market share. The controller assembled the following data for the most recent year. Cost and Usage for Production of 55,000 Units:
| Budgeted | Cost Quantity | Actual Cost |
Materials | $9,980,000 | | $10,135,000 |
Direct Labor | 3,996,000 | | 3,895,000 |
Indirect Labor | 5,600,000 | | 5,555,000 |
Inspection hours | | 4,000 | 899,000 |
Materials handling | | 111,000 | 589,000 |
Machine setups | | 6.060 | 1,924,000 |
Returns and rework | | 490 | 100,000 |
Total Costs | | | $23,097,000 |
Required:
Calculate the current cost per unit, target cost for maintaining current market share and profitability.
Cost management a strategic approach
ISBN: 978-0073526942
5th edition
Authors: Edward J. Blocher, David E. Stout, Gary Cokins