FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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Tool Industries manufactures large workbenches for industrial use. Sam Hartnet, the Vice President for marketing at Tool Industries, concluded from market analysis that sales were dwindling for Tool's workbenches due to aggressive pricing by competitors. Tool's workbench sells for $1,140 whereas the competition's comparable workbench sells for $1,060. Sam determined that a price drop to $1,060 would be necessary to protect its market share and maintain an annual sales level of 13,000 workbenches.

Cost data based on sales of 13,000 workbenches:

 

  Budgeted Quantity Actual Quantity Actual Cost
Direct materials (pounds) 175,000 168,000 $ 3,450,000
Direct labor (hours) 72,800 71,500 825,000
Machine setups (number of setups) 900 880 250,000
Mechanical assembly (machine hours) 273,000 281,250 3,750,000

 

If the profit per unit is maintained, the target cost per unit is (rounded to the nearest whole dollar):

 

Multiple Choice
  •  
    $489.
  •  
    $557.
  •  
    $516.
  •  
    $424.
  •  
    $345.
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