Problem
Mimco Ltd manufactures components for laptop computers. One of its top selling products is the new solid-state drive, the Nano, which will offer improved speed and performance. Earlier this year, a foreign company entered the market offering a similar drive at a price 10% below the Nano price of $350 per unit. Mimco Ltd is currently achieving its target profit margin of 20% on all of its products.
Task
• What target cost would have to be set for the Nano drive to remain competitive and meet the requirements of the company's target profit margin?
• Calculate the cost reduction objective.
• Outline two cost management techniques Mimco Ltd could apply to achieve the cost reduction objective.