Quality Industries Manufactures Large Workbenches for Industrial Use If the Profit Per Unit Is Maintained, the Target Cost

question 59

Multiple Choice

Quality Industries manufactures large workbenches for industrial use. Yewell Hartnet, the Vice President for marketing at Quality Industries, concluded from market analysis that sales were dwindling for Quality's workbenches due to aggressive pricing by competitors. Quality's workbench sells for $1,140 whereas the competition's comparable workbench sells for $1,060. Yewell determined that a price drop to $1,060 would be necessary to protect its market share and maintain an annual sales level of 13,000 workbenches.
Cost data based on sales of 13,000 workbenches:
$\begin{array}{lccc}&\begin{array}{c}\text { Budgeted } \\\text { Quantity }\end{array} & \begin{array}{c}\text { Actual } \\\text { Quantity }\end{array} &\text { Actual Cost} \\\text { Direct materials (pounds) } & 175,000 & 168,000 & \$ 3,450,000 \\\text { Direct labor (hours) } & 72,800 & 71,500 & 825,000 \\\text { Machine setups (no. of setups) } & 900 & 880 & 250,000 \\\text { Mechanical assembly (machine hours) } & 273,000 & 281,250 & 3,750,000\end{array}$ If the profit per unit is maintained, the target cost per unit is (rounded to the nearest whole dollar) :

• A) $489.
• B) $557.
• C) $516.
• D) $424.
• E) $345.

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