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    Target Costing - Phraud Car Parts Company - DSA

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    Adi Kurniawan
    PHRAUD Car Parts Company has a target to produce 1,500 units at a target cost of $116.25 per unit and target return on sales (ROS) of 25%. The current drifting cost per unit is $147, totaling $220,500 which exceeds the target cost of $174,375. Cost savings can be achieved by reducing defective units from 17.2% to 5.3%, reducing tooling costs by using 15 fewer tools, and reducing variable component costs by 13% per unit. These savings total $37,356, bringing the total drifting cost to $183,144, close to the $174,375 target.

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    Target Costing - Phraud Car Parts Company - DSA

    Uploaded by

    Adi Kurniawan
    28 views1 page
    PHRAUD Car Parts Company has a target to produce 1,500 units at a target cost of $116.25 per unit and target return on sales (ROS) of 25%. The current drifting cost per unit is $147, totaling $220,500 which exceeds the target cost of $174,375. Cost savings can be achieved by reducing defective units from 17.2% to 5.3%, reducing tooling costs by using 15 fewer tools, and reducing variable component costs by 13% per unit. These savings total $37,356, bringing the total drifting cost to $183,144, close to the $174,375 target.

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    Case Study_Target Costing - Phraud Parts

    Original Title

    Target Costing_Phraud Car Parts Company_DSA

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    PHRAUD Car Parts Company has a target to produce 1,500 units at a target cost of $116.25 per unit and target return on sales (ROS) of 25%. The current drifting cost per unit is $147, totaling $220,500 which exceeds the target cost of $174,375. Cost savings can be achieved by reducing defective units from 17.2% to 5.3%, reducing tooling costs by using 15 fewer tools, and reducing variable component costs by 13% per unit. These savings total $37,356, bringing the total drifting cost to $183,144, close to the $174,375 target.

    Copyright:

    © All Rights Reserved
    Download as XLSX, PDF, TXT or read online from Scribd
    Flag for inappropriate content
    Download as xlsx, pdf, or txt
    28 views1 page

    Target Costing - Phraud Car Parts Company - DSA

    Uploaded by

    Adi Kurniawan
    PHRAUD Car Parts Company has a target to produce 1,500 units at a target cost of $116.25 per unit and target return on sales (ROS) of 25%. The current drifting cost per unit is $147, totaling $220,500 which exceeds the target cost of $174,375. Cost savings can be achieved by reducing defective units from 17.2% to 5.3%, reducing tooling costs by using 15 fewer tools, and reducing variable component costs by 13% per unit. These savings total $37,356, bringing the total drifting cost to $183,144, close to the $174,375 target.

    Copyright:

    © All Rights Reserved
    Download as XLSX, PDF, TXT or read online from Scribd
    Flag for inappropriate content
    Download as xlsx, pdf, or txt
    of 1

    Target Costing

    PHRAUD Car Parts Company

    Total Order 1,500 units


    Price $ 155
    ROS (target) 25%
    ROS (Per unit) 38.75
    Target cost (per unit) $ 116.25
    Total target cost $ 174,375

    Drifting cost Cost per unit


    Variable cost $ 80
    Fixed cost $ 45
    Defective cost $ 20
    Tooling cost $ 2
    Total Drifting cost per unit $ 147
    Total Drifting cost $ 220,500

    Target cost saving 46,125

    Cost Saving from:


    Reducing defective units
    Rate of defect units (before) 17.20%
    Rate of defect units (after) 5.30%
    Delta 11.90%
    Defective cost per unit $ 20
    Cost saving from reducing defective cost $ 20,756

    Reducing Tooling cost


    Number of tools (before) 45
    Number of tools (after) 30
    Delta 15
    Tooling cost per unit $ 2
    Cost saving from reducing tooling cost $ 1,000

    Reducing component
    variable cost per unit (before) $ 80
    Delta 13%
    Cost saving from reducing component $ 15,600

    Total target cost saving $ 37,356

    Total drifting cost $ 220,500


    Target cost $ 183,144

    Difference $ 8,769
    Per unit $ 5.85

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