Therapy Instruments uses a manufacturing costing system with one direct-cost category (direct materials) and three indirect-cost categories:

a.Setup, production-order, and materials-handling costs that vary with the number of batchesb.Manufacturing-operations costs that vary with machine-hoursc.Costs of engineering changes that vary with the number of engineering changes made

In response to competitive pressures at the end of 2019, Therapy Instruments used value-engineering techniques to reduce manufacturing costs. Actual information for 2019 and 2020 is as follows:

20192020Setup, production-order, and materials-handling costs per batch$8,200$8,000Total manufacturing-operations cost per machine-hour$60$48Cost per engineering change$22,500$20,000

The management of Therapy Instruments wants to evaluate whether value engineering has succeeded in reducing the target manufacturing cost per unit of one of its products, HJ6, by 10%. Actual results for 2019 and 2020 for HJ6 are as follows:

Actual Results for 2019Actual Results for 2020Units of HJ6 produced6,0008,000Direct material cost per unit of HJ6$2,000$1,400Total number of batches required to produce HJ68090Total machine-hours required to produce HJ637,80040,800Number of engineering changes made168 Calculate the manufacturing cost per unit of HJ6 in 2019.Calculate the manufacturing cost per unit of HJ6 in 2020.Did Therapy Instruments achieve the target manufacturing cost per unit for HJ6 in 2020? Explain. Explain how Therapy Instruments reduced the manufacturing cost per unit of HJ6 in 2020.What challenges might managers at Therapy Instruments encounter in achieving the target cost? How might they overcome these challenges