Bhimani, Horngren,
Datar and Rajan,
Management and Cost Accounting, 5
th
Edition, Instructor’s Manual
© Pearson Education Limited 2012
4 The €12 reduction in cost per hour of assembly time (from €40 to €28) reduces product costs as follows PREV hours = €25.20. The new total manufacturing product cost is €621.70.
(€646.90 − €25.20) PREV hours = €19.20. The new total manufacturing product cost is €418.50.
(€437.70 − €19.20) The reduction in the assembly management activity rate further reduces the cost of PREV below the target cost. It also makes it more likely that PREV will achieve its target cost.
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