Park,Inc,Sells One of Its Products for $40 Each ACalculate the Target Cost for Maintaining Current Market Share and 2,000

Essay

Park,Inc.,sells one of its products for $40 each.Sales volume averages 2,000 units per year.Recently,its main competitor reduced the price of its product to $28.Park 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 2,000)is as follows:
$\begin{array}{lrrr}& \underline{\text {SQ}}& \underline{\text {AQ}}& \underline{\text {Actual Cost}}\\\text { Materials (kilograms) } & 4,900 & 5,000 & \$ 20,000 \\\text { Labour (hours) } & 1,200 & 1,250 & 10,000 \\\text { Setups (hours) } & 0 & 200 & 6,000 \\\text { Material handling (moves) } & 0 & 350 & 2,000 \\\text { Warranties (number repaired) } & 0 & 250 & 10,000\end{array}$

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?