Lovebug Company has determined that its new automotive hood screen would gain wi

Question

Lovebug Company has determined that its new automotive hood screen would gain widespread customer acceptance if the company could price it at or under $30. Anticipated labor hours and costs for each unit of the new product follow.

The company currently uses the following three activity-based cost rates:

The company's minimum desired profit is 40 percent over total production and delivery cost.

Compute the target cost for the new hood screen. Round your answer to two decimal places.

Direct materials cost $5 Direct labor cost Manufacturing labor:     Hours 0.2     Hourly labor rate $10 Assembly labor:     Hours 0.5     Hourly labor rate $15 Machine hours 1

Explanation / Answer

Direct Material $5.00 Direct Labor Cost: Manufacturing labor $2.00 Assembly labor $7.50 Materials handling $0.30 Production $5.00 Product delivery $0.50 Total production cost $20.30 Profit @ 40% $8.12 Target Cost $28.42

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