Figure 21-8
At the beginning of the year, Grant Company initiated a quality improvement program. The program was successful in reducing scrap and rework costs. To help assess the impact of the quality improvement program, the following data were collected for the current and preceding years:
-Park, SA., 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: Required:
a.
Calculate the target cost for maintaining current market share and profitability.
b.
Calculate the nonvalue-added cost per unit.
c.
If nonvalue-added costs can be reduced to zero, can the target cost be achieved?

Question

Figure 21-8
At the beginning of the year, Grant Company initiated a quality improvement program. The program was successful in reducing scrap and rework costs. To help assess the impact of the quality improvement program, the following data were collected for the current and preceding years: 
-Park, SA., 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:  Required: 
a.
Calculate the target cost for maintaining current market share and profitability.
b.
Calculate the nonvalue-added cost per unit.
c.
If nonvalue-added costs can be reduced to zero, can the target cost be achieved?

Quizplus · Accepted Answer

The Answer of Figure 21-8
At the beginning of the year, Grant Company initiated a quality improvement program. The program was successful in reducing scrap and rework costs. To help assess the impact of the quality improvement program, the following data were collected for the current and preceding years: 
-Park, SA., 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:  Required: 
a.
Calculate the target cost for maintaining current market share and profitability.
b.
Calculate the nonvalue-added cost per unit.
c.
If nonvalue-added costs can be reduced to zero, can the target cost be achieved?

Figure 21-8 at the Beginning of the Year, Grant Company Initiated a Initiated