Park, SA, Sells One of Its Products for £40 Each

question 89

Essay

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: $$\begin{array} { l c c c } & \text { SQ } & \text { AQ } & \text { Actual Cost } \\\text { Materials (kgs) } & 4,900 & 5,000 & £ 20,000 \\\text { Labour (hours) } & 1,200 & 1,250 & 10,000 \\\text { Setups (hours) } & 0 & 200 & 6,000 \\\text { Material handling (moves) } & 0 & 350 & 2,000 \\\text { Warranties (number repaired) } & 0 & 250 & 10,000\end{array}$$
a.Calculate the target cost for maintaining current market share and profitability.
b.Calculate the nonvalue-added cost per unit.
c.If nonvalue-added costs can be reduced to zero, can the target cost be achieved?

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Definitions:

Third Variables

Factors that are not directly involved in the research hypothesis but can influence the relationship between the variables being studied.

Confounds

Variables other than the independent variable that may cause an effect in an experimental design, thus confusing the results.

Random Assignment

A method used in experiments where participants are randomly placed into either the control or experimental group to ensure that each group is similar at the start.

Experimental Research

Experimental research is a methodological approach that systematically manipulates one variable to determine its effect on another variable, within a controlled environment.