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Direct bour Direct dire 10. Target Costs using ABC System, Effect of product-design changes on Product Costs Kala Ltd manufactures many products. To compute Manufacturing Cost, it uses a Costing System with one Direct-Cost category (Direct Materials) and three Indirect-Cost categories - Batch-related Set-up, Production Order, and Materials-Handling Costs, all of which vary with the number of batches. Manufacturing Operations costs that vary with machine-hours. Costs of Engineering Changes that vary with the number of engineering changes made. In response to competitive pressures at the end of year 1, Product Designers at the Company employed Value Engineering techniques to reduce Manufacturing Costs. Actual Information for Year 1 and Year 2 follow- Particulars Actual Results for Year 1 Actual Results for Year 2 Total Setup, Production-Order, and Material-Handling Costs 72,00,000 75,00,000 Total Number of Batches 900 1,000 Total Manufacturing Operations Costs 1,21,00,000 * 1,25,00,000 Total Number of Machine Hours worked 220,000 250,000 Total Costs of Engineering Changes 26,40,000 20,00,000 Total Number of Engineering Changes made 220 200 The Company wants to evaluate whether Value Engineering has succeeded in reducing the Target Manufacturing Cost per unit of one of its main products, KL-69, by 12%. Actual Results for Year 1 and Year 2 for KL-69 are - Target Costing and Cost Reduction Aspects 2.2.2012 Particulars Units of KL-69 produced Direct Materials Costs per unit of KL-69 Jotal No. of batches required to produce KL-69 Total machine-hours required to produce KL-69 Clumber of Engineering Changes made Calculate the Manufacturing Cost per unit of KL-69 for Year 1 and Year 2. 2 Did the Company achieve the Target Manufacturing Cost per unit for KL-69? Show your calculations. el Actual Results for Year 2 4,000 71,100 80 22,000 10 Actual Results for Year 1 3,500 1,200 70 21,000 14 Direct bour Direct dire 10. Target Costs using ABC System, Effect of product-design changes on Product Costs Kala Ltd manufactures many products. To compute Manufacturing Cost, it uses a Costing System with one Direct-Cost category (Direct Materials) and three Indirect-Cost categories - Batch-related Set-up, Production Order, and Materials-Handling Costs, all of which vary with the number of batches. Manufacturing Operations costs that vary with machine-hours. Costs of Engineering Changes that vary with the number of engineering changes made. In response to competitive pressures at the end of year 1, Product Designers at the Company employed Value Engineering techniques to reduce Manufacturing Costs. Actual Information for Year 1 and Year 2 follow- Particulars Actual Results for Year 1 Actual Results for Year 2 Total Setup, Production-Order, and Material-Handling Costs 72,00,000 75,00,000 Total Number of Batches 900 1,000 Total Manufacturing Operations Costs 1,21,00,000 * 1,25,00,000 Total Number of Machine Hours worked 220,000 250,000 Total Costs of Engineering Changes 26,40,000 20,00,000 Total Number of Engineering Changes made 220 200 The Company wants to evaluate whether Value Engineering has succeeded in reducing the Target Manufacturing Cost per unit of one of its main products, KL-69, by 12%. Actual Results for Year 1 and Year 2 for KL-69 are - Target Costing and Cost Reduction Aspects 2.2.2012 Particulars Units of KL-69 produced Direct Materials Costs per unit of KL-69 Jotal No. of batches required to produce KL-69 Total machine-hours required to produce KL-69 Clumber of Engineering Changes made Calculate the Manufacturing Cost per unit of KL-69 for Year 1 and Year 2. 2 Did the Company achieve the Target Manufacturing Cost per unit for KL-69? Show your calculations. el Actual Results for Year 2 4,000 71,100 80 22,000 10 Actual Results for Year 1 3,500 1,200 70 21,000 14

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