Question

Seemore Company manufactures binoculars. The actual costs for 2013 and 2014 were as follows:

2013 2014
Direct materials:
Plastic case $8.00 $7.60
Lens set 34.00 34.40
Direct Labor 64.00 (1.6 hours) 60.00 (1.5 hours)
Indirect manufacturing costs:
Variable 16.00 14.20
Fixed 4.00 (100,000 units) 3.80 (120,000 units)
Beginning in 2014, Seemore implemented a continuous improvement program that required a first-year cost reduction target of a 7 percent reduction of the 2013 base.
Seemore's continuous improvement target for plastic cases in 2014 was:
a. $8.00
b. $7.60
c. $7.44
d. $8.80

Answer 1

c. $7.44

Step-by-step explanation:

Seemore's Company continuous improvement target for plastic cases in 2014 would be calculated by subtracting 7% of cost of plastic cases in 2013 from the cost of plastic cases in 2013 as the target cost reduction is 7%

= $8 - ($8 * 7%)

= 8 - ($8 * 0.07)

= $8 - $0.56

= $7.44