Quality Industries Manufactures Large Workbenches for Industrial Use In Order to Reduce Costs So as to Reach the the Vice

question 7

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 retain market share and annual sales of 13,000 workbenches.
Cost data based on sales of 13,000 workbenches:
$\begin{array}{lccc}&\begin{array}{c}\text { Budgeted } \\\text { Quantity }\end{array} & \begin{array}{c}\text { Actual } \\\text { Quantity }\end{array} &\text { Actual Cost} \\\text { Direct materials (pounds) } & 175,000 & 168,000 & \$ 3,450,000 \\\text { Direct labor (hours) } & 72,800 & 71,500 & 825,000 \\\text { Machine setups (no. of setups) } & 900 & 880 & 250,000 \\\text { Mechanical assembly (machine hours) } & 273,000 & 281,250 & 3,750,000\end{array}$ In order to reduce costs so as to reach the desired target cost, Quality Industries 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:

Placebo Effect

Experimental results caused by expectations alone; any effect on behavior caused by the administration of an inert substance or condition, which the recipient assumes is an active agent.

Alleviation

The act of making something less severe or more bearable, often used in reference to pain, symptoms, or stress.

Psychotherapy

A treatment approach that uses psychological methods to help a person change and overcome problems in desired ways.

Cognitive-behavioral Therapy

A form of psychological treatment that addresses dysfunctional emotions, behaviors, and cognitions through a goal-oriented, systematic process.