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.
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.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
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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