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:** $1,900- **Annual demand:** 84,000 units- **Life cycle:** 5 years- **Target profit:** 22 percentage return on sales### Required:1. Compute the target cost of this product.2. Compute the target cost if Majesty wants a 44 percent return on sales.3. Compute the target cost if Majesty wants a 12 percent return on sales.| 1. Target Cost ||----------------|| || 2. Target Cost ||----------------|| || 3. Target Cost ||----------------|| |

When determining the cost of a product using target costing, a targeted profit margin is subtracted…

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 Annual demand Life cycle Target profit $ 1,900 84,000 units 5 years 22 percentage return on sales Required: 1. Compute the target cost of this product. 2. Compute the target cost if Majesty wants a 44 percent return on sales. 3. Compute the target cost if Majesty wants a 12 percent return on sales.

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 Annual demand Life cycle Target profit $ 1,900 84,000 units 5 years 22 percentage return on sales Required: 1. Compute the target cost of this product. 2. Compute the target cost if Majesty wants a 44 percent return on sales. 3. Compute the target cost if Majesty wants a 12 percent return on sales.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Concept explainers

Pricing

Pricing is used as a term in finance and economics, pricing is the process of fixing a value for a product or a service. Pricing establishes a value for a product or service that the customer has to pay. A business can choose from different strategies while deciding to set prices.

Question

100%

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:** $1,900
- **Annual demand:** 84,000 units
- **Life cycle:** 5 years
- **Target profit:** 22 percentage return on sales

### Required:

1. Compute the target cost of this product.
2. Compute the target cost if Majesty wants a 44 percent return on sales.
3. Compute the target cost if Majesty wants a 12 percent return on sales.

| 1. Target Cost |
|----------------|
| |

| 2. Target Cost |
|----------------|
| |

| 3. Target Cost |
|----------------|
| |

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