Business, 25.11.2021 06:20 kerriscaballero12

TwoShaft Inc. manufactures a wide variety of parts for recreational boating, including boat engines. The component is purchased by OEM (Original Equipment Manufacturers) such as Mercury and Honda, for use in the larger and more powerful outboards. The units sell for $660, and sales volume averages 32,000 units per year. Recently, TwoShaft's major competitor lowered the price of the equivalent part to $590. The market was very competitive, and TwoShaft realized it had to meet the new price or lose significant market share. The controller assembled the following data for the most recent year: Cost and Usage for Production of 38,000 Units
Budgeted Cost Actual Quantity Actual Cost
Materials $7,980,000 $8,550,000
Direct labor 2,736,000 2,622,000
Indirect labor 3,914,000 3,686,000
Inspection (hours) 3,230 646,000
Materials handling (number of purchases) 800 494,000
Machine setups 4,560 1,824,000
Returns and rework (number of times) 760 114,000
Total $17,936,000

Required:
a. Calculate the target cost for maintaining current market share and profitability.
b. How should the company attempt to reduce cost to meet the new target cost?

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TwoShaft Inc. manufactures a wide variety of parts for recreational boating, including boat engines....

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