Question

Please urgent, Patient Care Instruments uses a manufacturing costing system with one direct cost category​ (direct materials) and three indirect cost​ categories: The management of Patient Care Instruments wants to evaluate whether value engineering has succeeded in reducing the target manufacturing cost per unit of one of its​ products, HJ6, by 20​%

In response to competitive pressures at the end of 2017​, Patient Care Instruments used​ value-engineering techniques to reduce manufacturing costs. Actual information for 2017and 2018 ​is:

	2017	2018
Setup, production order, and materials-handling costs per batch	$8,700	$8,000
Total manufacturing-operations cost per machine-hour	62	54
Cost per engineering change	33,750	22,500

Catagories:

a.	​Setup, production​ order, and​ materials-handling costs that vary with the number of batches
b.	Manufacturing operations costs that vary with​ machine-hours
c.	Costs of engineering changes that vary with the number of engineering changes made

Actual results

	Actual Results for 2017	Actual Results for 2018
Units of HJ6 produced	7,500	9,000
Direct material cost per unit of HJ6	$3,000	$1,600
Total number of batches required to produce HJ6	60	70
Total machine-hours required to produce HJ6	48,750	43,200
Number of engineering changes made	10	8

Requirements 1 and 2. Calculate the manufacturing cost per unit of HJ6 in 2017 and then in 2018. ​(Round your answers to the nearest​ dollar.)

	2017
	cost per unit
Direct materials
Batch-level costs
Mfg. operations costs
Engineering change costs
Total

2018

cost per unit

Requirement 3. Did Patient Care Instruments achieve the target manufacturing cost per unit for HJ6 in 2018​? Explain. Begin by computing the target manufacturing cost per unit for HJ6 in 2018. Determine the​ formula, and then complete the computation. ​(Enter any ratios used in decimal form to two decimal​ places, .XX. Round your final answer to the nearest whole​ dollar.)

				Target manufacturing
	x		=	cost per unit
	x		=

Patient Care Instruments ▼ did or did not achieve its target manufacturing cost per unit.

Requirement 4. Explain how Patient Care

Instruments reduced the manufacturing cost per unit of HJ6 in 2018. Select each of the actions taken by Patient Care Instruments to reduce the manufacturing cost per unit of HJ6 in 2018. ​(Leave any unused cells​ blank.)

Answer 1

Requirements 1 and 2. Calculate the manufacturing cost per unit of HJ6 in 2017 and then in 2018. ​(Round your answers to the nearest​ dollar.)
	2017			2018
	Total Cost	cost per unit		Total cost	cost per unit
Direct materials	$      22,500,000	$       3,000		$      14,400,000	$       1,600
Batch-level costs	$           522,000	$            70		$           560,000	$            62
Mfg. operations costs	$        3,022,500	$          403		$        2,332,800	$          259
Engineering change costs	$           337,500	$            45		$           180,000	$            20
Total	$      26,382,000	$       3,518		$      17,472,800	$       1,941
Requirement 3. Did Patient Care Instruments achieve the target manufacturing cost per unit for HJ6 in 2018​? Explain. Begin by computing the target manufacturing cost per unit for HJ6 in 2018. Determine the​ formula, and then complete the computation. ​(Enter any ratios used in decimal form to two decimal​ places, .XX. Round your final answer to the nearest whole​ dollar.)
				Target manufacturing
Manufacturing cost per unit	x	0.80	=	cost per unit
$                                                                                3,518	x	0.80	=	$          2,814.08
Patient Care Instruments  did  achieve its target manufacturing cost per unit.
Requirement 4. Explain how Patient Care
Instruments reduced the manufacturing cost per unit of HJ6 in 2018. Select each of the actions taken by Patient Care Instruments to reduce the manufacturing cost per unit of HJ6 in 2018. ​(Leave any unused cells​ blank.)
Medical Instruments reduced the cost per unit in each of the four cost categories—direct materials costs, batch-level costs, manufacturing operations costs, and engineering change costs. It also reduced machine-hours and number of engineering changes made—the quantities of the cost drivers.