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In addition, the current profit per unit must be maintained.

Information about the product (for production of 4,000) is as follows.

Standard Quantity Actual Quantity Actual Cost

Materials (pounds) 5,800 6,000 $60,000
Labor (hours) 1,800 2,000 $20,000
Setups (hours) 0 225 $8,000
Material handling (moves) 0 400 $5,000
Warranties (number repaired) 0 300 $15,000

Required:

a) find out the target cost for maintaining current market share and profitability.

b) find out the non-value-added cost per unit.

c) If non-value-added costs can be reduced to zero, can the target cost be achieved?

Accounting Basics, Accounting

  • Category:- Accounting Basics
  • Reference No.:- M938334

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