An electronics manufacturing company is planning to introduce a new product in the market. The best competitor sells a similar product at $420/unit. Other pertinent data are as follows:

Production hours:        2.61 hours /unit

Direct labor cost:         $15.00/hour

Factory overhead:       120% of direct labor

Production materials: $300/unit

Packing cost:               20% of direct labor

The profit margin is based on the total manufacturing costs.

(a) using the information given, determine the maximum profit margin that the company can have so as to remain competitive.

(b) if the company desires a profit margin of 15%, can the target cost be achieved? If not, suggest two ways in which the target cost can be achieved.

Direct labor = ($15/hour)(2.61 hours/unit) = $39.15/unit

Factory overhead = (1.2)($39.15/unit)        = $46.98/unit

Production material                                     = $300/unit

Packing costs = (0.2)($39.15/unit)              = $ 7.83/unit

                                                                   _____________

                            Total manufacturing cost = $393.96/unit

In Mart‘s early stages of design, engineers believed that the cost of a Mart spacecraft is related to its weight. Six spacecraft cost and weight data have been collected and normalized (in the next table).

A plot of the data suggests a linear relationship.

Use a spreadsheet model to determine the values of the coefficients for the CER.

Determine the SE and the correlation coefficient for the CER developed.

Spacecraft   Weight (lb)   Cost ($ million)

     1                 400                  278

     2                 530                  414

     3                 750                  557

     4                 900                  689

     5                 1,130               740

     6                 1,200               851