1) Target cost for maintaining current market share and profitability

Unit cost = $13,715,000 25,000 = $548.60

Current Profit = $610 - $548.60 = $61.40
New target cost to meet competitive price = $548.60 - $61.40 = $487.20

2 a) the standard cost analysis shows an unfavorable materials variance of $500,000 or $20 per
unit which is significant variance. Controlling this variance will make the firm much more
competitive.
b) The standard cost shows an unfavorable direct labor variance of $125,000, or $5 per unit, an
opportunity for cost savings.
c) The remaining manufacturing costs can be considered non-value adding costs, since they do
not add to the functionality or quality of the product. Between, company can try to reduce the
manufacturing cost which is 163.60$ per unit.