Quality Chairs Inc In Order to Reduce Costs So as to Reach the Winters

question 49

Multiple Choice

Quality Chairs Inc. (QC) manufactures chairs for industrial use. Laura Winters, the Vice President for Marketing at QC, concluded from market analysis that sales were dwindling for QC's standard three-foot chair due to aggressive pricing by competitors. QC's chairs sold for $550 whereas the competition's comparable chair was selling for $495. Winters determined that a price drop to $495 would be necessary to regain market share and reach a targeted annual sales level of 10,000 chairs.
Cost data based on sales of 10,000 chairs:
$\begin{array}{lcc}&\text { Budgeted } & \text { Actual } \\&\text { Quantity } & \text { Quantity }\\\text { Direct materials (board feet) } & 88,000 & 79,500 & \$ 1,250,000 \\\text { Direct labor (hours) } & 71,350 & 73,775 & 875,000 \\\text { Machine hours (hours) } & 11,400 & 11,250 & 250,000 \\\text { Finishing and packing (hours) } & 6,500 & 6,400 & 125,000\end{array}$ In order to reduce costs so as to reach the desired target cost, Quality Chairs should also focus on reducing the cost of:

• A) Direct materials
• B) Direct labor
• C) Machine setups
• D) Mechanical assembly

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Definitions:

SWOT Analysis

A strategic planning tool used to identify an organization's Strengths, Weaknesses, Opportunities, and Threats, facilitating informed decision-making.

Environmental Reporting

The practice of disclosing information about a company's environmental performance and impact to stakeholders, often part of corporate social responsibility reports.

Strategic Analysis

The process of conducting research on the business environment and the company itself to formulate strategy.

Environmental Concerns

Issues related to the natural environment due to human activities or processes, including pollution, natural resource depletion, and climate change.