2024 – Household Manufacturing Inc sells its product for 45 each Sales volume averages 2 000 units per year Recently

Household Manufacturing Inc. sells its product for $45 each.

 

 

Sales volume averages 2,000 units per year.

 

 

Recently, its main competitor reduced the price of its product to $30.

 

 

Maximum 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 2,000) is as follows:

 

 

 

 

 

	Standard Quantity	Actual Quantity	Actual Cost
Materials (pounds)	3,200	3,500	35,000
Labor (hours) 900	1,000	30,000
Setups (hours) –	125	3,000
Material handling (moves)	–	200	4,000
Warranties (number repaired)	–	450	11,000

 

 

 

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-valueadded costs can be reduced to zero, can the target cost be achieved?