MANAGEMENT AT FOX VALLEY MACHINE TOOL CO IS CONSIDERING THE DEVELOPMENT OF A NEW AUTOMATED DRILL PRESS CALLED THE AUTO DRILL. AFTER CONFERRING WITH THE DESIGN ENGINEERS THE CONTROLLER’S STAFF ASSEMBLED THE FOLLOWING DATA ABOUT THIS PRODUCT
TARGET SELLING PRICE $6,000 PER UNIT
DESIRED PROFIT PERCENTAGE 20% OF TOTAL UNIT COST
PROJECTED UNIT DEMAND 4,500
ACTIVITY BASED COST RATES
MATERIAL HANDLING 5% OF DIRECT MATERIALS AND PURCHASED PARTS COST
ENGINERING $300 PER UNIT FOR AUTODRILL
PRODUCTION AND ASSEMBLY $50 PER MACHINE HOUR
DELIVERY $570 PER UNIT FOR AUTO DRILL
MARKETING $400 PER UNIT FOR AUTO DRILL
PER UNIT DATA
DIRECT MATERIAL COST $1,620
PURCHASED PARTS COST $200
MANUFACTURING LABOR
HOURS 6
HOURLY LABOR RATE $14
ASSEMBLY LABOR
HOUR 10
HOURLY LABOR RATE $15
MACHINE HOURS 30
1 COMPUTE THE PRODUCT’S TARGET COST
2 COMPUTE THE PRODUCT’S PROJECTED UNIT COST BASED ON THE DESIGN ENGINEERS’S ESTIMATES
3 SHOULD MANAGEMENT PRODUCE AND MARKET THE AUTODRILL DEFEND YOUR ANSWER
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