Sayre sewing machine company has been in operation formore than 25 years during
ID: 2373759 • Letter: S
Question
Sayre sewing machine company has been in operation formore than 25 years during this time it has shown consisting growth and has developed a strong customer satasfaction the company's president state that her business is a quality product at a competitive price until recently and this carred company to its current position the company is palnning for nest yesr operation and sayre is concerrned about projected increased foreign comptition
for the last three years sayre has been manufacturing as its only product a machine that has the charictristics of both a serger and zigzag machins called the sergzig durring the current year the company expectets to sell 200,000machine at a average price of $ 700 to remain competitive and continue to sell 200,000 machine Sayre belive will have reduce the selling price to $ 580 for the next year
sayres earn 15 percent return on sales as shown
Sales price per unit $ 700
product cost per unit
Materials $ 77
Motor 60
housing unit 50
mechanical parts 86
misc part 22
assembly labor 90
testing labor 60 $ 445
product level equipment 70
genaral administartive cost 80
total product cost $ 595
profit per unit $ 105
return on sales 15%
in panning for the next year even at the reduce sales price the company wants maintaine the 15percent return on sales by reducing cost as follows
sayre can purchase computer chip at $45 per unit by committing to long term purchase agremment for the year's needs with with suppliers the long term agrement calls for suppliers to certify that allchips are free defect
sayre can reduce number of housing units and misc parts by 18 percents by substuting equivelant but less expensive parts and by redesigning the housing to eliminate multiple parts
because of these changes the company can reduce assembly and testing labor and equipment and facility cost specific to the sergzig by 20 percents net of redesign cost
all other product cost will remain the same
please answer all
A based on new data sof next year can the Sayre meet or exceed its target of 15 percents return on sales show calcualtion
B assumem that competitive during the next year is stronger than sayre anticipate and that average selling price is only $ 540 per unit calsulate the cost reduction to achieve the 15 percent return on sales show calculation
Explanation / Answer
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