Clark,Inc,Sells One of Its Products for $150 Each ACalculate the Target Cost for Maintaining Current Market Share and 800

Essay

Clark,Inc.,sells one of its products for $150 each.Sales volume averages 800 units per year.Recently,its main competitor reduced the price of its product to $130.Clark expects sales to drop dramatically unless it matches the competitor's price.In addition,the current profit per unit must be maintained.Information about the product (for production of 800)is as follows:
$\begin{array}{lrrr}& \underline{\text { SQ}}& \underline{\text { AQ}}& \underline{\text { Actual Cost}}\\\text { Materials (kilograms) } & 14,400 & 15,000 & \$ 30,000 \\\text { Labour (hours) } & 2,000 & 2,400 & 18,000 \\\text { Setups (hours) } & 0 & 1,400 & 8,000 \\\text { Material handling (moves) } & 0 & 600 & 4,000 \\\text { Warranties (number repaired) } & 0 & 400 & 20,000\end{array}$

a.Calculate the target cost for maintaining current market share and profitability.
b.Calculate the non-value-added cost per unit.
c.If non-value-added costs can be reduced to zero,can the target cost be achieved?