Question

White Tiger Electronics produces CD players using an automated assembly line process. The standard cost of CD players is ​$161161 per unit​ (labor, ​$3434​; ​materials, ​$7474​; and​ overhead, ​$5353​). The sales price is ​$300300 per unit. a. To achieve a 1414 percent multifactor productivity improvement by reducing materials costs​ only, one needs to reduce the materials cost by nothing percent. ​(Enter your response as a percent rounded to two decimal​ places.)

Answer 1

Answer:  26.37%

Explanation:

Given that,

Standard cost of CD players = ​$161 per unit

Labor = ​$34

Materials = ​$74

Overhead = ​$53

Sales price = ​$300 per unit

Current multi-factor productivity = $\frac{Sales\ price}{standard\ cost\ of\ CD\ players}$

                                                      = $\frac{300}{161}$

                                                      = 1.86

Revised multi-factor productivity after productivity increase by 14 % = 2.1204

Thus given sales price remaining constant at $ 300 and multi-factor productivity of 2.1204

Revised standard cost of CD players = $\frac{300}{2.1204}$

                                                             = $141.48

Let the corresponding material cost be $m,

Therefore,

Labor cost + m + overhead cost = $141.48

$34 + m + $53 = $141.48

m = $54.48

percentage reduction in material cost = $\frac{Initial\ cost - Revised\ material\ cost}{initial\ cost}\times100$

= $\frac{74 - 54.48}{74}\times100$

= 26.37%

MATERIAL COST MUST REDUCE BY 26.37%.