成本與管理會計學

SRB Corporation is a mid-sized manufacturer of home espresso machines competing in the increasingly crowded premium small-appliance market. For several years, SRB has positioned its core espresso machine as a reliable, mid-range product sold through specialty retailers at a list price of $80 per unit. During the most recent accounting period, SRB produced and sold 5,000 espresso machines. The company's accounting department reported the following cost structure for this production volume:

Direct materials totaled $18,250, direct labor amounted to $36,250, and variable manufacturing overhead was $22,250. In addition, SRB incurred $59,000 in fixed manufacturing overhead. Beyond manufacturing, variable nonmanufacturing costs were $19,750, while fixed nonmanufacturing costs totaled $41,000. Total costs for the period were $196,500.

As competition intensifies and consumer expectations evolve, SRB's senior management team is reassessing its pricing and cost strategies. The marketing research department has proposed developing a higher-quality espresso machine featuring improved durability and enhanced brewing performance. Market analysis suggests that this upgraded model could command a selling price of $120 per unit. However, top management has stated that it will approve the project only if the product can achieve a 40% profit margin. Management has asked the accounting team to determine whether this target is feasible from a cost perspective.

At the same time, a separate market study has raised concerns about SRB's current product. The study suggests that competitive pressures may force the company to reduce the selling price of its existing espresso machine to $60 per unit in order to maintain market share. Management wishes to preserve the same 40% profit margin on the existing product and is considering whether proportional cost reductions across all cost categories could make this price reduction viable.

Independently of these pricing concerns, SRB's operations manager is optimistic about next year's sales outlook. Based on distributor feedback and anticipated growth in at-home coffee consumption, SRB expects demand for its current espresso machine to increase by 25% in the coming year. Management believes that production can expand to meet this demand without exceeding the relevant range. SRB's pricing policy is to apply a 40% markup on total cost, including allocated fixed costs, when setting product prices.

Required:

You are a management accountant at SRB Corporation and have been asked to assist senior management with the following analyses:

(a) Determine the target cost per unit for the proposed higher-quality espresso machine, given the expected selling price and required profit margin.

(b) Assuming SRB must reduce the selling price of its existing espresso machine to $60 while maintaining a 40% profit margin, calculate the percentage reduction required in all listed cost categories, assuming costs are reduced proportionally.

(c) Ignoring the pricing scenario in part (b) above, analyze the impact of the anticipated 25% increase in demand. Assuming SRB applies a 40% markup on total cost and remains within the relevant range, calculate total profit.

(d) At the current sales level, calculate SRB's degree of operating leverage (DOL). Interpret this measure and discuss what it implies.

(e) Following the analyses in parts (a)~(d) above, the CFO has asked you to prepare an internal memo to senior management addressing the implications of the proposed pricing and cost strategies. Provide a clear recommendation on whether SRB should prioritize (i) cost reduction, (ii) product differentiation, or (iii) volume expansion as its primary strategic response. Justify your recommendation and discuss the uncertainties using cost and management accounting logic. Your memo should be written in a professional business style, clearly structured, and focused on managerial decision usefulness.