Required: 1. Calculate the Current Cost and Profit Per Unit

question 83

Essay

Required:
1. Calculate the current cost and profit per unit.
2. How much of the current cost per unit is attributable to non-value added activities?
3. Calculate the new target cost per unit for a sales price of $400 if the profit per unit is maintained.
4. What strategy do you suggest for Warrenton to attain the target cost calculated in part (3)?Warrenton Industries manufactures hydraulic components for large automated machine tools. Myles English, the Vice President for Marketing, has concluded from his market analysis that sales are dwindling for one of the firm's products main products, a hydraulic valve, because of aggressive pricing by competitors. Warrenton's product sells for $525 whereas the competition's comparable part is selling in the $425 range. Mr. English has determined that a price drop to $400 is necessary to regain market share and annual sales of 1,000 units.
Cost data based on sales of 1,000 valves:

---

Definitions:

Proactive Interference

The phenomenon where old memories hinder the recall of newly learned information.

Source Monitoring

The process of determining the origins of our memories, knowledge, or beliefs, distinguishing between different sources.

Reality Monitoring

The process of distinguishing between memories of actual events and imagined events.

Interference Effects

Refers to the phenomenon where the learning of new information or skills hampers the ability to recall or perform previously learned information or skills.