Suburbia, Inc., sells one of its products for $150 each. Sales volume averages 800 units per year.
Question:
Suburbia, Inc., sells one of its products for $150 each. Sales volume averages 800 units per year. Recently, its main competitor reduced the price of its product to $130. Suburbia expects 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 800) is as follows:
SQ AQ Actual Cost
Materials (pounds) 14,400 15,000 $30,000
Labor (hours) 2,000 2,400 18,000
Setups (hours) 0 1,400 8,000
Material handling (moves) 0 600 4,000
Warranties (number repaired) 0 400 20,000
Required:
a.Calculate the target cost for maintaining current market share and profitability.b.Calculate the non-value-added cost per unit.c.If non-value-added costs can be reduced to zero, can the target cost be achieved?
b.Calculate the non-value-added cost per unit.c.If non-value-added costs can be reduced to zero, can the target cost be achieved?
c.If non-value-added costs can be reduced to zero, can the target cost be achieved?
Expert Answer:
Answer To calculate the target cost for maintaining current market share and profitability we can us... View the full answer
