An electronics manufacturing company is planning to introduce a new product in the market. The best competitor sells a similar product at $420/unit. Other pertinent data are as follows:
Direct labor cost: $15.00/hour
Factory overhead: 120% of direct labor
Production Materials: $300/unit
Packing Costs: 20% of direct labor
It has been found that 85% learning curve applies ot the labor required. The time to complete the first unit has been estimated to be 5.26 hr. The company decides to use the time required to complete 20th unit as a standard for cost estimation purposes. The total profit margin is based on the total manufacturing costs:
a) Using the information given, determine the maximum profit margin the company can have so as to remain competitive.
b) If the company desires a profit of 15%, can the target cast be achieved? If not, suggest two ways in which the target cost can be achieved.