Medical Instruments uses a manufacturing costing system with one direct cost category (direct…

Medical Instruments uses a manufacturing costing system with one direct cost category (direct materials) and three indirect cost categories:

 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.

 In response to competitive pressures at the end of 2014, Medical Instruments used value-engineering techniques to reduce manufacturing costs. Actual information for 2014 and 2015 is:

The management of Medical Instruments wants to evaluate whether value engineering has succeeded in reducing the target manufacturing cost per unit of one of its products, HJ6, by 10%. Actual results for 2014 and 2015 for HJ6 are:

Required

 1. Calculate the manufacturing cost per unit of HJ6 in 2014.

 2. Calculate the manufacturing cost per unit of HJ6 in 2015.

 3. Did Medical Instruments achieve the target manufacturing cost per unit for HJ6 in 2015? Explain.

 4. Explain how Medical Instruments reduced the manufacturing cost per unit of HJ6 in 2015.

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