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ENGINEERING ECONOMICS CLO 2 Marks 25 An electronics manufacturing company...

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Accounting

ENGINEERING ECONOMICS
CLO 2
Marks 25
An electronics manufacturing company is planning to introduce a new product in the market. The best competitor sells a similar product at $420? unit. Other pertinent data are as follows:
Direct labor cost: $15.00? hour
Factory overhead: 120% of direct labor
Production materials: $300? unit
Packaging costs: 20% of direct labor
It has been found that an 85% learning curve applies to the labor required. The time to complete the first unit has been estimated to be 5.26 hours. The company decides to use the time required to complete the 20th unit as a standard for cost estimation purposes. The profit margin is based on the total manufacturing costs.
(a) Using the information given, calculate the maximum profit margin that the company can have so as to remain competitive.
(b) If the company desires a profit margin of 15%, what would be the target production cost and can it be achieved under given conditions?
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