Target CostingLaser Impressions Inc. manufactures color laser printers. Model J20 presently sells for $400 and has a product cost of $320, as follows:Direct materials$230Direct labor60Factory overhead30Total$320It is estimated that the competitive selling price for color laser printers of this type will drop to $380 next year. Laser Impressions has established a target cost tomaintain its historical markup percentage on product cost. Engineers have provided the following cost-reduction ideas:1. Purchase a plastic printer cover with snap-on assembly, rather than with screws. This will reduce the amount of direct labor by 9 minutes per unit.2. Add an inspection step that will add six minutes per unit of direct labor but reduce the materials cost by $8 per unit.3. Decrease the cycle time of the injection molding machine from four minutes to three minutes per part. Thirty percent of the direct labor and 42% of the factoryoverhead are related to running injection molding machines.The direct labor rate is $25 per hour.a. Determine the target cost for Model J20, assuming that the historical markup on product cost and selling price are maintained. Round your final answer to twodecimal places.2$304per unitb. Determine the required cost reduction. Enter as a positive number. Round your final answer to two decimal places.16per unitc. Evaluate the three engineering improvements together to determine if the required cost reduction (drift) can be achieved. Enter all amounts as positive numbers.Do not round interim calculations but round your final answers to two decimal places.3.75 V per unit1. Direct labor reduction-2.50per unit2. Additional inspection%248.00 Xper unit3. Injection molding productivity improvement16.75per unitTotal savings%24%24%24%24

Necessary cost reduction amount has been calculated step by step.

c. Evaluate the three engineering improvements together to determine if the required cost Do not round interim calculations but round your final answers to two decimal places. 1. Direct labor reduction 3.75 V per unit 2. Additional inspection %24 -2.50 X per unit 3. Injection molding productivity improvement 24 ৪.00 X per unit Total savings 16.75 per unit

c. Evaluate the three engineering improvements together to determine if the required cost Do not round interim calculations but round your final answers to two decimal places. 1. Direct labor reduction 3.75 V per unit 2. Additional inspection %24 -2.50 X per unit 3. Injection molding productivity improvement 24 ৪.00 X per unit Total savings 16.75 per unit

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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PART D
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