Question

Laser impressions inc. manufactures color laser printers. model j20 presently sells for $450 and has a product cost of $360, as follows: line item description amount direct materials $260 direct labor 70 factory overhead 30 total $360 it is estimated that the competitive selling price for color laser printers of this type will drop to $430 next year. laser impressions has established a target cost to maintain its historical markup percentage on product cost. engineers have provided the following cost-reduction ideas: 1. purchase a plastic printer cover with snap-on assembly, rather than with screws. this will reduce the amount of direct labor by 9 minutes per unit. 2. add an inspection step that will add six minutes per unit of direct labor but reduce the materials cost by $9 per unit. 3. decrease the cycle time of the injection molding machine from four minutes to three minutes per part. thirty percent of the direct labor and 45% of the factory overhead are related to running injection molding machines. the direct labor rate is $29 per hour. a. determine the target cost for model j20, assuming that the historical markup on product cost and selling price are maintained. round your final answer to two decimal places.

(a) $391.60
(b) $396.80
(c) $404.20
(d) $410.40

Answer 1

To determine the target cost for model J20, subtract the product cost from the target selling price and divide by 1 plus the markup percentage. The target cost is then $296.80.

Step-by-step explanation:

To determine the target cost for model J20, we need to calculate the target selling price. We know that the current selling price is $450 and engineers estimate that the competitive selling price for similar printers will be $430 next year. To maintain the historical markup percentage on product cost, we can subtract the product cost from the target selling price and divide by 1 plus the markup percentage. The product cost is $360, so the markup percentage is ($430 - $360) / $360 = 19.44%. The target cost is then $360 / (1+0.1944) = $296.80.