^{it will very helpful for me if u answer the questions:}

4. Pacific Decor, Inc., designs, manufactures, and sells contemporary wood

furniture. Ling Li is a furniture designer for Pacific. Li has spent much of the past

month working on the design of a high-end dining room table. The design has

been well-received by

Jose Alvarez, the product development manager. However, Alvarez wants to

make sure that the table can be priced competitively. Amy Hoover, Pacific's cost

accountant, presents Alvarez with the following cost data for the expected

production of 200 tables:

Design cost $ 5,000

Direct materials 120,000

Direct manufacturing labor 142,000

Variable manufacturing overhead 64,000

Fixed manufacturing overhead 46,500

Marketing 15,000

a) Alvarez thinks that Pacific can successfully market the table for $2,000.

The company's target operating income is 10% of revenue. Calculate the

target full cost of producing the 200 tables. Does the cost estimate

developed by Hoover meet Pacific's requirements? Is value engineering

needed?

b) Alvarez discovers that Li has designed the table two inches wider than the

standard size of wood normally used by Pacific. Reducing the table's size

by two inches will lower the cost of direct materials by 40%. However,

the redesign will require an additional $6,000 of design cost, and the table

will be sold for $1,950. Will this design change allow the table to meet its

target cost? Are the costs of materials a locked-in cost?

c) Li insists that the two inches are an absolute necessity in terms of the

table's design. She believes that spending an additional $7,000 on better

marketing will allow Pacific to sell the tables for $2,200. If this is the case,

will the table's target cost be achieved without any value engineering?

d) Compare the total operating income on the 200 tables for requirements 2

and 3. What do you recommend Pacific do, based solely on your

calculations? Explain briefly.