RSM322H1 Lecture Notes - Lecture 10: Whole-Life Cost, Target Costing, Profit Margin
Document Summary
Solutions to blocher chapter 10 questions on target costing. Question 13-37 target costing: cost per unit = (,500,000 + ,750,000 + ,000 + Profit per unit = (,000 price per unit - ,500 cost per unit) = ,500 per unit: machine setups do not add value to the golf carts. First and foremost, weekend golfer should focus on getting back on budget. Inefficiencies in materials usage have led an extra . 50/unit in cost (,500,000-,200,000)/8,000). Also, getting labor on budget would save an additional . 75/unit (,750,000/125,000hours = per hour; 25,000 hours excess x = ,000; Labor and materials costs should be reduced by . 75 + . 50 = Additional savings could come from reducing the non-value added costs from machine setups. This could be done through product design and manufacturing process reengineering. Also, a careful examination of mechanical assembly might reveal cost saving opportunities because this category currently comprises half of the cost per unit.
