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  • Case Study 4 - Phraud Car Parts Co - Sha

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    Ali Basya
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    Phraud Car Parts Company received an order for 1,500 units priced at $155 per unit. Their target cost was $122 per unit but their initial projected costs totaled $220,500, or $147 per unit. Through value engineering, they were able to reduce costs by $25 per unit, bringing costs down to $183,145 total or $122 per unit. However, this was still $8,770 over their target cost so they needed to increase the selling price by $8 per unit to $163 per unit to cover costs.

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    CASE STUDY 4 - PHRAUD CAR PARTS CO - SHA

    Original Title

    CASE STUDY 4 - PHRAUD CAR PARTS CO - SHA

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    Phraud Car Parts Company received an order for 1,500 units priced at $155 per unit. Their target cost was $122 per unit but their initial projected costs totaled $220,500, or $147 per unit. Through value engineering, they were able to reduce costs by $25 per unit, bringing costs down to $183,145 total or $122 per unit. However, this was still $8,770 over their target cost so they needed to increase the selling price by $8 per unit to $163 per unit to cover costs.

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    © All Rights Reserved
    Download as XLSX, PDF, TXT or read online from Scribd
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    3 views4 pages

    Case Study 4 - Phraud Car Parts Co - Sha

    Uploaded by

    Ali Basya
    Phraud Car Parts Company received an order for 1,500 units priced at $155 per unit. Their target cost was $122 per unit but their initial projected costs totaled $220,500, or $147 per unit. Through value engineering, they were able to reduce costs by $25 per unit, bringing costs down to $183,145 total or $122 per unit. However, this was still $8,770 over their target cost so they needed to increase the selling price by $8 per unit to $163 per unit to cover costs.

    Copyright:

    © All Rights Reserved
    Download as XLSX, PDF, TXT or read online from Scribd
    Flag for inappropriate content
    of 4

    Case Study on Target Costing

    Phraud Car Parts Company

    Case info:

    Order 1,500 unit


    Price 155 US$
    Return on sales 25%

    Drifting cost Savings


    - Variable cost 80 per unit - 10.40
    - Fixed cost 45 per unit
    - Defective unit cost 20 per unit - 13.84
    - Tooling cost 2 per unit - 0.67

    Total Cost 147 - 25

    a Total Drifting cost before and after VE

    Drifting cost BEFORE


    - Variable cost 120,000
    - Fixed cost 67,500
    - Defective unit cost 30,000
    - Tooling cost 3,000

    Total 220,500

    b Price increase

    Revenue 232,500
    Operating Margin 58,125
    Cost 174,375

    Cost afte VE still larger than the expected cost, so the company need to raise the price

    Cost after VE 183,145


    Cost need to cover - 8,770

    Increase selling price 11,694 8 US$


    Requested selling price 232,500 155 US$

    Increased selling price 163 US$


    Revenue 244,194
    Operating margin 58,125
    Total Cost 186,069 larger than cost after VE
    Target cost
    70
    45
    6
    1

    122

    AFTER
    104,400
    67,500
    9,244
    2,001

    183,145
    er than cost after VE

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