Palms, Inc., sells one of its products for $80 each. Sales volume averages 2,000 units per year. Recently, its main competitor reduced the price

of its product to $56. Palms expects its sales to drop dramatically unless it matches the competitor's price. In addition, the current profit per unit

must be maintained.

Information about the product (for production of 2,000) is as follows:

 

1. Calculate the target cost for maintaining current market share and profitability
2. Calculate the non-value-added cost per unit.
3. If non-value-added costs can be reduced to zero, can the target cost be achieved?

Transcribed Image Text:

SQ AQ Actual Cost Materials (pounds) Labor (hours) 9800 10000 $40,000 2400 2500 $20,000 Setups (hours) Material handling (moves) Warranties (number repaired) 400 $12,000 700 $4,000 500 $20,000 SQ AQ Actual Cost Materials (pounds) Labor (hours) 9800 10000 $40,000 2400 2500 $20,000 Setups (hours) Material handling (moves) Warranties (number repaired) 400 $12,000 700 $4,000 500 $20,000

Answer rating: 100% (QA)

b NonvalueAdded Costs Materials4000010000 4 per pound 1000... View the full answer