Managerial Accounting: E4-19 Majesty Company uses target costing to ensure

Managerial Accounting E4-19 Calculating Target Cost 
Majesty Company uses target costing to ensure that its products are profitable. Assume Majesty is planning to introduce a new product with the following estimates: 
Estimated market price $1,200 
Annual demand 100,000 units 
Life cycle 5 years 
Target profit 30% return on sales 
 
Required: 
1. Compute the target cost of this product. 
2. Compute the target cost if Majesty wants a 40 percent return on sales. 
3. Compute the target cost if Majesty wants a 15 percent return on sales.
 
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