Target Costing Basic Motor Corporation uses target costing. Assume that Basic marketing personnel estimate that the competitive selling price for the QuikCar in the upcoming model year will need to be $24,300. Assume further that the QuikCar's total unit cost for the upcoming model year is estimated to be $19,600 and that Basic requires a 20% profit margin on selling price (which is equivalent to a 25% markup on total cost). a. What price will Basic establish for the QuikCar for the upcoming model year? b. Since the estimated manufacturing cost exceeds ✓the target cost, Toyota must reduce ✓its total costs to maintain competitive pricing within its
Target Costing Basic Motor Corporation uses target costing. Assume that Basic marketing personnel estimate that the competitive selling price for the QuikCar in the upcoming model year will need to be $24,300. Assume further that the QuikCar's total unit cost for the upcoming model year is estimated to be $19,600 and that Basic requires a 20% profit margin on selling price (which is equivalent to a 25% markup on total cost). a. What price will Basic establish for the QuikCar for the upcoming model year? b. Since the estimated manufacturing cost exceeds ✓the target cost, Toyota must reduce ✓its total costs to maintain competitive pricing within its
Chapter1: Financial Statements And Business Decisions
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Transcribed Image Text:Target Costing
Basic Motor Corporation uses target costing. Assume that Basic marketing personnel estimate that the competitive selling price for the QuikCar in the upcoming model
year will need to be $24,300. Assume further that the QuikCar's total unit cost for the upcoming model year is estimated to be $19,600 and that Basic requires a 20%
profit margin on selling price (which is equivalent to a 25% markup on total cost).
a. What price will Basic establish for the QuikCar for the upcoming model year?
b. Since the estimated manufacturing cost exceeds
profit objectives.
✔the target cost, Toyota must reduce
✓its total costs to maintain competitive pricing within its
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